CFAS CHAPTER 6

68問 • 11ヶ月前

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The process of capturing for inclusion in the financial statements an item that makes the definition of an asset, liability, equity, income or expense.

recognition

The amount at which an asset, a liability or equity is recognized in the statement of financial position is reported as _____

carrying amount

Links the elements to the statement of financial position and statement of financial performance.

recognition

The statements are linked because the recognition of an item in one statement requires the recognition of the same item in another statement.

recognition

For example, the recognition of income happens simultaneously with the recognition of an increase in asset or decrease in liability.

recognition

The recognition of expense happens simultaneously with recognition of a disgrace in asset or increase in liability.

recognition

Only items that meet the definition of an asset, liability or equity are recognized in the _____

statement of financial position

Only items that meet the definition of income or expense are recognized in the ____

statement of financial performance

In addition to meeting the definition of an element, items are recognized only when their recognition provides users of financial statements with information that is both relevant and faithfully represented.

recognition

Does not focus anymore on how probable economic benefits will flow to or from the entity and that the cost can be measured reliably.

recognition

The basic principle of ____ is that the income shall be recognized when earned.

income recognition

With respect to sale of goods in the ordinary course of business, the point of sale is unquestionably the point of ____

income recognition

The reason is that it is at the point of sale that the entity has transferred to the buyer the significant risks and rewards of ownership of the goods.

income recognition

_____ to the goods passes to the buyer at the point of sale.

legal title

It is at the point of sale that entity has transferred control of the cuts to the customer

income recognition

However, under certain conditions, income may be recognized at the point of production, during production and at the point of collection.

income recognition

This principle means that expenses are recognized when incurred.

expense recognition

The expense recognition principle is the application of the?

matching principle

The generation of revenue is not without any cost. There has got to be some cost in earning a revenue.

expense recognition

Requires that those costs and expenses include in earning a revenue shall be reported in the same period.

matching principle

The MATCHING principle or EXPENSE RECOGNITION principle has three applications, namely:

a. cause and effect association b. systematic and rational allocation c. immediate recognition

The expense is recognized when the revenue is already recognized.

cause and effect association

The reason is the presume direct association of the expense with specific income.

cause and effect association

The cause and effect association principle is actually the?

strict matching concept

Involves the simultaneous or combined recognition of revenue and expenses that result directly and jointly from the same transactions or events.

matching of cost with revenue

The best example is the cost of merchandise inventory. Other examples include doubtful accounts, warranty expense and sales commissions.

cause and effect association

Some costs are expensed by simply allocating them over the periods benefited.

systematic and rational allocation

The reason for this principle is that the cost incurred will benefit future periods and that there is an absence of a direct or clear association of the expense with specific revenue.

systematic and rational allocation

When economic benefits are expected to arise over several accounting periods and association with income can only be broadly or indirectly determined, expenses are recognized on the basis of _____

systematic and rational allocation

Concrete examples include depreciation of property, plant and equipment, amortization of intangibles, and allocation of prepaid rent, insurance and other prepayments.

systematic and rational allocation

Under this principle, the cost incurred is expensed outright because of uncertainty of future economic benefits or difficulty of reliably associated costs with future revenue.

immediate recognition

When an expenditure produces no future economic benefit.

immediate recognition

When cost incurred does not qualify or ceases to qualify for recognition as an asset.

immediate recognition

Examples include officers salaries and most administrative expenses, advertising and most selling expenses, amount to settle lawsuit and worthless intangibles.

immediate recognition

Many losses, such as loss from disposal of building, lost from sale of investments, and casualty laws are _______ because they are not directly related to specific revenue.

immediately recognized immediate recognition

Is defined as the removal of all or part of a recognized asset or liability from the statement of financial position.

de- recognition

Normally occurs when an item no longer meets the definition of an asset or a liability.

deecognition

Occurs when the entity loses control of all are part of the asset.

derecognition of an asset

Occurs when the entity no longer has a present obligation for all or part of the liability.

derecognition of a liability

Is defined as quantifying and monetary terms the elements in the financial statements.

measurement

The revised conceptual framework mentions two categories of measurement:

historical cost and current value

______ of an asset is the cost incurred in acquiring or creating the asset comprising the consideration paid plus transaction cost.

historical cost or original acquisition cost

_____ of a liability is the consideration received to incur the liability minus transaction cost.

historical cost

Is the entry price or entry value to acquire an asset or to incur a liability.

historical cost

An application of the historical cost measurement is to measure financial asset and financial liability at _____

amortized cost

Reflects the estimate of future cash flows discounted at a rate determined at initial recognition.

amortized cost

_____ is updated because of: a. Depreciation and amortization B. Payment received as a result of disposing part or all of the asset C. Impairment D. Accrual of interest to reflect any financing component of the asset E. Amortized cost measurement of financial asset

historical cost of an asset

_____ is updated because of: A. Payment made or satisfying an obligation to deliver goods B. Increase in value of the obligation to transfer economic resources such that the liability becomes onerous C. Accrual of interest to reflect any financing component of liability D. Amortized cost measurement of financial liability

historical cost of a liability

Current value includes:

a. fair value b. value in use for asset c. fulfillment value for liability d. current cost

Is the price that would be received to sell an asset in an orderly transaction between market participants at measurement date.

fair value of an asset

Is the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date.

fair value of liability

Fair value is an?

exit price or exit value

Can be observed directly using market price after asset or liability in an active market.

fair value

In case where fair value cannot be directly measured, an entity can use ____

present value of cash flows

Is not adjusted for transaction cost. The reason is that such cost is a characteristic of a transaction and not of the asset or liability.

fair value

Is the present value of the cash flows that an entity expects to derive from the use of an asset and from the ultimate disposal.

value in use

Does not include transaction cost on acquiring the asset but includes transaction cost on the disposal of the asset.

value in use

Value in use is an?

exit price or exit value

Is the present value of cash that an entity expects to transfer in paying or settling a liability.

fulfillment value

Does not include transaction cost on incurring a liability but includes transaction cost on fulfillment of a liability.

fulfillment value

Fulfillment value is an?

exit price or exit value

Is the cost of an equivalent asset at the measurement date comprising the consideration paid and transaction cost.

current cost of an asset

Is the consideration that would be received less any transaction cost at measurement date.

current cost of a liability

Similar to historical cost, current cost is also based on _____ but reflects market conditions and measurement date.

entry price or entry value

In _____ for an asset or a liability and further related income and expense, it is necessary to consider the nature of the information that the measurement basis will produce.

selecting a measurement basis

In most cases, no single factor will determine which ____ should be selected.

measurement basis

Is the measurement basis most commonly adopted in preparing financial statements.

historical cost

In many situations, it is simpler and less costly to measure _____ then it is to measure a current value. It is generally well understood and verifiable also.

historical cost

Business Finance

Sab Sescon · 46問 · 2年前

Business Finance