FAR Mini Exam 1 Review

List the valuation techniques

Cost Approach, Income Approach, Market Approach

Cost Approach

Fair value measurement in which current replacement cost is used to determine the fair value of an asset

Income Approach

Fair value measurement in which future cash flows or earnings are discounted to determine fair value

Market Approach

Fair value measurement in which price and other market information from identical or comparable assets or liabilities is used to measure fair value

Components of ‘accumulated other comprehsive income’

P - Pension plan adjustments
U - Unrealized gains and losses from avaliable-for-sale debt securities and hedges
F - Foreign currency translation adjustments
I - Instrument specific credit risk

Comprehensive basis of accounting other than GAAP

-Cash basis/ modified cash basis
-Income tax basis
-Prescribed regulatory basis
-Other basis with substantial support

Cash Basis

recognize revenue when cash is received and expenses when cash is paid

Modified cash basis

a hybrid of cash and accrual accounting. it generally follows the cash basis but includes selected acrcrual-type items, such as capitalized and depreciated fixed assets, inventory, borrowings, accrued income taxes, or fair value measurements. the modifications cannot be so extensive that the statements become accrual-basis financial statements.

Prescribed regulatory basis

uses accounting rules required by a government regulatory agency

other basis with substantial support

a basis that is not cash, modified cash, tax, or regulatory basis but has widespread understanding and substantial support.

cash receipts and disbursements basis of accounting

cash basis example

basis of accounting used by an entity to files its income tax return

income tax basis example

basis of accounting used by an entity to comply with the financial reporting requirements of a lending institution

prescribed regulatory basis example

a price level basis, which adjusts financial information for changes in purchasing power

other basis with substantial support example

Risks and uncertainties disclosures under GAAP criteria

-the concentration exists at the financial statement date
-the concentration makes the entity vulnerable to the risk of a near-term severe impact
-it is at least reasonably possible that the events that could cause the severe impact will occur in the short term