This concept may be misinterpreted to permit a deliberate understatement of net assets or net income.
It supports the immediate recognition of a contingent loss
Materiality
Only information that can influence users of the financial statements must be reported
Going concern assumption
An entity is assumed to be able to fulfill its obligations and accomplish its objectives
Historical cost
The amount of cash or equivalent paid to acquire and asset
Appropriate standards setting body for each entity type
1. US based sole proprietorship- (FASB)
2. City of New York- (GASB)
3. France-Based bread company (IASB)
4. The Federal Government (FASAB)
5. Corporation X, based in the US (FASB)
6. China based Corp. (ISAB)
7. Village of Lazy Lake, Florida (GASB)
8. A partnership established in the US (FASB)
Select the applicable grouping for components of the FASB's conceptual framework
1. Economic entity (Assumption)
2. Conservatism (Constraint)
3. Revenue Recognition (Principle)
4. Full Disclosure (Principle)
, 5. Periodicity (Assumption)
6. Industry Practice (Constraint)
7. Matching (Principle)
8. Going concern (Assumption)
9. Monetary Unit (Assumption)
10. Historical Cost (Principle)
Current Tax expense equals
current taxable income*current tax rate
Deferred tax expense equals
the increase in taxable temporary differences*enacted tax rate
Comprehensive income
All changes in equity during a period except those resulting from investments by owners and
distributions to owners
Included in comprehensive income
1. all revenues and gains, expenses and losses reported in net income and
2. all gains and losses that bypass net income but affect stockholders' equity
Things in "Other Comprehensive Income"
1. Unrealized gains and losses on available-for-sale securities
2. Effective portion of gains and losses on derivatives used as cash flow hedges
3. Amounts associated with the funded status of post-retirement defined benefit plans
4. Certain translation gains and losses on foreign currency
The effect of a material transaction that is infrequent in occurrence but not unusual in nature should be
presented separately as a component of income from continuing operations when the transaction
results in a
GAIN AND LOSS!!! To be classified as an extraordinary item, a transaction must be both unusual in
nature and infrequent in occurrence within the environment in which the business operates. If an item
meets one but not both of these criteria, it should be presented separately as a component of income
from continuing operations (but not net of tax). Whether it is a gain or a loss does not affect this
presentation.
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