Day One
Work Accounting Cycle example Illustration 2-6 from chapter 2, as a review
Chapter One
Theoretical Structure of Financial Accounting
P 6/7 Cash Basis v Accrual Accounting
Securities Exchange Commission
GAAP generally accepted accounting principles
financial accounting standards board
EITF emerging issues task force
GAAP
FASB
IFRS International Financial Reporting Standards
IASB international accounting standards board
IFRS
IASB
Accounting firms
accounting v auditing
P 21 Objective of financial reporting
The objective of financial reporting is to provide financial information about
companies that is useful to capital providers in making decisions.
Financial reporting should provide information about the
Amount, timing and uncertainty of a company’s future cash flows
the economic resources (assets) and claims against those resources (liabilities)
Relevance
Predictive value
confirmatory value materiality
Faithful representation
Completeness
neutrality
free from material misstatement
Comparability (and consistency)
Verifiability
Timeliness
Understandability
P 25 Elements
Revenues
Expenses
Gains
Losses
Income statement
Comprehensive income
Investment by owners
Distribution to owners
State of owners’ equity
Assets
Balance sheet
Liabilities
Equity (Net Assets)
Materiality
Going concern
Periodicity
Historical cost
Recognition
Revenue recognition
1.
2.
3.
4.
5.
chapter 5
Identify the Contract with a customer
Identify the Performance Obligation or Performance Obligations in the Contract
Determine the Transaction Price
Allocate the Transaction Price to each Performance Obligation
Recognize revenue when or as each Performance Obligation is satisfied
Expense recognition
Cause and effect relationship
Associating an expense with revenues recognized in a period
Systematic & rational
In the period incurred
Realization
Disclosure
on the face of the statements
Footnotes
P 29 Measurement
Cost
Net Realizable Value / lower of cost or NRV
Current cost (replacement cost)
Present value
Fair market value
Fair value
ILL 1-13
market approaches
Income approach
Cost approach
Level 1
Level 2
Level 3
P/E multiple
pv of NI or cash flows
replacement cost
quoted market prices
observable inputs - transactions of comparable assets
-market interest rates
internal inputs