F1-F6 Financial Reporting Final Review Flashcards

Practice flashcards for F1 through F6 Financial Reporting modules covering balance sheets, income statements, inventory, liabilities, NFP, and governmental accounting.

Balance Sheet

A financial statement used to view short-term and long-term financial risk and the capacity to produce revenue.

Selling Expenses

Expenses that specifically include freight-out costs.

Other Comprehensive Income (OCI)

Components include Pension adjustments, Unrealized gains and losses on AFS securities and hedges, Foreign currency translation items, and Instrument-specified credit risk (PUFI).

Discontinued Operations

Reported items including impairment losses (carrying value vs fair value), operating losses for the entire year, and loss on disposal, recorded in the year of disposal.

10-K Filing Deadline

$60$ days for large accelerated filers ($>\text{700M}$ market value), $75$ days for accelerated filers, and $90$ days for all other filers; these reports must be audited.

Diluted EPS (Warrants)

Warrants are dilutive if the average market price is greater than the exercise price ($\text{In the money}$).

Book Value Per Share

Calculated as $\frac{\text{Shareholders Equity} - \text{Preferred Equity}}{\text{Weighted Average of Common Shares Outstanding}}$.

Scrip Dividend

A special form of notes payable used during cash shortages that commits to paying a dividend later and may bear interest.

Property Dividend

A non-cash dividend recorded at the fair market value of the property on the date of declaration, with any gain or loss recorded on the income statement.

Percentage Completion Method

A revenue recognition principle based on the matching principle where Gross Profit equals $(\text{Revenue} - \text{Total Costs}) \times \frac{\text{Costs Incurred to Date}}{\text{Total Costs}}$.

Bill-and-Hold Arrangement

Allows revenue recognition prior to product transfer if there is a substantive reason, the product is identified separately and ready for transfer, and the entity cannot redirect it.

Change in Accounting Estimate

Accounting changes, such as a change in depreciation method, that are handled prospectively.

Fair Value Level 1

The highest priority level for fair value measurement, using quoted prices in active markets for identical assets or liabilities.

Quick Ratio (Acid Test)

Calculated as $\frac{\text{Cash} + \text{Equivalents} + \text{Short-term Marketable Securities} + \text{Net Receivables}}{\text{Current Liabilities}}$.

Cash Conversion Cycle

The sum of Days Sales in AR and Days in Inventory, minus Days of Payables Outstanding.

Bank Reconciliation (Bank Balance)

Adjustments made to the bank side including adding Deposits in Transit and subtracting Outstanding Checks.

Factoring Without Recourse

The sale of receivables where the factor assumes the risk of loss and the seller retains no control.

FOB Destination

Shipping terms where the buyer obtains the title only when the goods are received by the buyer.

Lower of Cost or Market

Inventory valuation rule used for LIFO or Retail methods, where market is the middle value of Ceiling (NRV), Floor ($\text{NRV} - \text{Normal Profit Margin}$), and Replacement Cost.

Capitalized Interest

The amount capitalized during fixed asset construction, which is the lower of actual interest incurred or the computed interest based on weighted average accumulated expenditures.

Double Declining Balance Depreciation

An accelerated method calculated as $(\text{Cost} - \text{Accumulated Depreciation}) \times \frac{2}{\text{Useful Life}}$; salvage value is ignored until the floor is reached.

Acid Test (Quick Ratio)

Liquid assets including cash, equivalents, marketable securities, and net receivables divided by current liabilities.

Recoverability Test (Intangibles)

A test for impairment where the carrying amount of a finite-life asset is compared with the sum of its undiscounted expected future cash flows.

Asset Retirement Obligation (ARO)

A liability recorded at present value for legal obligations associated with retiring a tangible long-lived asset, adjusted annually via accretion expense.

Finance Lease Criteria (OWNES)

A lease is a finance lease if it meets one: Ownership transfer, Written purchase option, NPV $\ge$ 90% of fair value, term $\ge$ 75% of economic life, or Specialized asset.

Trading Securities

Debt or equity securities held with the intent of frequent buying and selling; unrealized gains and losses are reported on the income statement.

Equity Method

Accounting for 20%-50% ownership where the investment increases by the investor's share of earnings and decreases by dividends received.

Consolidation Elimination (CAR I'm IN is BIG)

The process of eliminating the subsidiary's equity (Common stock, APIC, Retained Earnings) and the parent's Investment in subsidiary at acquisition.

Deferred Tax Liability (DTL)

Recognized when financial statement income exceeds taxable income due to temporary differences, such as accelerated depreciation for tax purposes.

Net Operating Loss (NOL)

Occurs when tax-deductible expenses exceed taxable revenues; since 2021, these are carried forward indefinitely and limited to 80% of taxable income.

NFP Functional Classification

Categorizing NFP expenses by program services (mission-related) and support services (management, fundraising, and membership development).

NFP Donated Services

Services recorded as contribution revenue and expense only if they create/enhance an asset or require specialized skills that would otherwise be purchased (SOME).

Modified Accrual Basis

Used by governmental funds where revenue is recognized when it is both measurable and available (collectible within 60 days of year-end).

GRaSPP

Mnemonic for the five governmental funds: General, Special Revenue, debt Service, capital Projects, and Permanent funds.

SE-CIPPOE

Mnemonic for proprietary and fiduciary funds using full accrual: Internal Service, Enterprise, Custodial, Investment Trust, Private Purpose Trust, Pension, and Other Employee Trust.