FAR 1 – Balance Sheet, Income Statement, Comprehensive Income & Equity

Vocabulary flashcards covering key FAR 1 concepts: financial statement presentations, comprehensive income, EPS, SEC filings, and shareholders’ equity topics.

Classified Balance Sheet

A balance sheet that separates current and non-current assets and liabilities; permitted under U.S. GAAP.

Liquidity-Based Balance Sheet

Alternative GAAP presentation that orders assets and liabilities by liquidity rather than current/non-current categorization.

Income Statement Purpose

Reports revenues, expenses, gains, and losses to show profit performance and fund flows in the period.

Expired Costs

Costs that have been used up in generating revenue; recorded as expenses.

Unexpired Costs

Future economic benefits that remain; reported as assets until consumed.

Gross Concept

Reporting revenues and expenses separately (e.g., sales and cost of goods sold).

Net Concept

Reporting the difference between inflows and outflows as a single amount (e.g., gain or loss).

Multiple-Step Income Statement

Separates operating from non-operating sections and presents gross profit, operating income, and other subtotals.

Single-Step Income Statement

Reports a single subtraction: total expenses (including tax) from total revenues to derive net income.

Income from Continuing Operations

Profit generated by the entity’s ongoing segments, excluding discontinued operations.

Discontinued Operations

Results of a component held for sale or disposed of that represents a strategic shift; reported net of tax.

Impairment Loss (Discontinued Ops)

Write-down recognized when carrying amount exceeds fair value less costs to sell for a component held for sale.

Foreign Currency Transaction Gain/Loss

Adjustment for exchange rate changes between transaction date and settlement or year-end.

Comprehensive Income

All changes in equity from non-owner sources, including net income and other comprehensive income (OCI).

Other Comprehensive Income (OCI)

Revenues, expenses, gains, and losses excluded from net income but included in comprehensive income.

PUFI Mnemonic

Pension adjustments, Unrealized gains/losses on AFS debt securities & hedges, Foreign currency translation items, Instrument-specific credit risk.

Accumulated Other Comprehensive Income

Equity account that accumulates all OCI components to date at credit balance

One-Statement Approach

Single statement presenting both net income and comprehensive income.

Two-Statement Approach

Income statement followed by a separate statement of comprehensive income.

Earnings per Share (EPS)

Amount of income attributed to each share of common stock for the period.

Simple Capital Structure

Entity that has only common stock outstanding; reports basic EPS only.

Basic EPS

Income available to common shareholders divided by weighted-average common shares outstanding.

Complex Capital Structure

Entity with potentially dilutive securities; must present basic and diluted EPS.

Diluted EPS

EPS calculated assuming conversion or exercise of all dilutive securities using if-converted or treasury-stock methods.

Antidilutive Securities

Potential common shares that increase EPS if assumed converted; excluded from diluted EPS.

Contingent Shares

Shares issuable upon satisfaction of conditions; included in basic EPS once conditions are met and if dilutive.

Form 10-K

Annual SEC filing with audited GAAP financials and MD&A; due 60/75/90 days after year-end depending on filer status.

Form 10-Q

Quarterly SEC filing with unaudited GAAP interim statements and MD&A; due 40/45 days after quarter-end.

Form 8-K

SEC filing used to announce material events or corporate changes on a current basis.

Stockholders’ Equity Components

Capital stock, additional paid-in capital, retained earnings, accumulated OCI, and treasury stock.

Capital Stock (Legal Capital)

Par or stated value of issued shares; includes authorized, issued, and outstanding shares.

Treasury Stock

Company’s own shares that have been issued but subsequently reacquired; not outstanding.

Common Shareholders’ Equity

Total equity minus preferred shareholders’ claims.

Book Value per Common Share

Common shareholders’ equity divided by ending common shares outstanding.

Preferred Stock Features

May be cumulative, participating, convertible, or mandatorily redeemable (liability classification).

Additional Paid-In Capital (APIC)

Equity from amounts paid over par/stated value and other capital transactions.

Retained Earnings

Cumulative net income minus dividends and certain adjustments (e.g., prior-period errors, accounting changes).

Cost Method for Treasury Stock

Records treasury shares at reacquisition cost; gains/losses recognized in APIC-TS upon reissue.

Par Value (Legal) Method

Treasury stock recorded at par; APIC and retained earnings adjusted on reacquisition.

Donated Shares

Shares received as a gift; recorded as treasury stock at fair value with credit to contributed capital.

Stock Subscription

Contract to purchase shares at a future date; creates subscription receivable and APIC upon agreement.

Stock Rights

Options granted to existing shareholders to buy additional shares; affect equity when exercised.

Property Dividend

Distribution of non-cash assets to shareholders; recorded at fair value with gain/loss recognized on declaration date.

Small Stock Dividend

Stock dividend < 20–25% of outstanding shares; recorded at fair value of issued shares.

Large Stock Dividend

Stock dividend > 20–25% of outstanding shares; recorded at par value of shares issued.

Stock Split

Increase in number of shares with proportionate reduction in par value; no journal entry required.

Statement of Changes in Shareholders’ Equity

Financial statement detailing period-to-period movements in each equity component.