FAR — Financial Accounting & Reporting (Core) | CHEAT SHEET

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QUALITATIVE CHARACTERISTICS

Two Fundamental (Must Have)

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Four Enhancing (Nice to Have)

Comparability | Verifiability | Timeliness | Understandability ---

ELEMENTS & RECOGNITION

Elements of Financial Statements

Balance Sheet: Assets | Liabilities | Equity Income Statement: Revenues | Expenses | Gains | Losses Recognition criteria: (1) Meets element definition (2) Measurable (3) Material/Relevant ---

MEASUREMENT ATTRIBUTES

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ACCOUNTS RECEIVABLE

Allowance method (GAAP required if material): `` Bad Debt Expense XXX Allowance for Doubtful Accounts XXX ` Write-off: Allowance DR, A/R CR (no income statement hit) ---

INVENTORY

Cost Flow Methods (Rising Prices)

|---|---|---| LCNRV = Lower of Cost or Net Realizable Value (NRV = selling price − completion costs) → Write-down with NO reversal under US GAAP LIFO Reserve = FIFO Inv − LIFO Inv ---

PP&E & DEPRECIATION

Capitalize if: Extends useful life OR increases value beyond 1 year

Depreciation Methods

|---|---|---| Impairment (ASC 360):

• Test: Carrying value > Undiscounted CFO → Impaired

• Loss = Carrying value − Fair value

• NO reversal allowed

Disposal: ` Cash XXX Accumulated Depreciation XXX Asset (cost) XXX Gain/Loss (plug) XXX `` ---

REVENUE RECOGNITION (ASC 606)

5-Step Model

Identify contract with customer

Identify performance obligations (POs)

Determine transaction price (including variable consideration)

Allocate price to each PO

Recognize revenue when PO satisfied (over time OR point in time)

Over-time criteria: Customer controls as created OR receives/consumes benefits OR has no alternative use + right to payment Variable consideration: Include only if highly probable no significant reversal (use expected value or most likely amount) ---

ACCOUNTING CHANGES & ERRORS

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CASH FLOW STATEMENT

Three Categories

Operating (net income ± adjustments) | Investing (buy/sell assets) | Financing (debt, equity)

Indirect Method Key Adjustments

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ASSETS VS. LIABILITIES VS. EQUITY

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GOING CONCERN

Assumption: Entity will continue indefinitely Substantial doubt exists → Disclose in notes (no modification to audit opinion in most cases; auditor considers management's plans) ---

DISCLOSURE PRINCIPLE

Include all information necessary to avoid misleading statements:

• Notes (accounting policies, contingencies, details)

• Supplementary info (segment, interim, inflation)

• Required disclosures (mandated by standards)

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IFRS VS. US GAAP QUICK HITS

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Relevance	Faithful Representation
Predictive/confirmatory value	Complete, neutral, free from error
Materiality = omitting/misstating would influence user decisions
Historical Cost	Fixed at acquisition	PP&E, property
Current Replacement Cost	Cost to replace today	Inventory NRV
Fair Value	Price in orderly transaction	Investments, derivatives
Present Value	Discounted future cash flows	Long-term liabilities, leases
Net Realizable Value	Selling price − completion costs	A/R, inventory
FIFO	LIFO	Weighted Avg
↑ Ending inv	↓ Ending inv	Middle
↓ COGS	↑ COGS	—
↑ NI, ↑ Tax	↓ NI, ↓ Tax	—
Method	Formula	Type
Straight-Line	(Cost − Salvage) / Life	Standard
DDB	2 × (1/Life) × Book Value	Accelerated; ignore salvage until end
Sum-of-Years' Digits	(Remaining / SYD sum) × (Cost − Salvage)	Accelerated
Units of Production	(Cost − Salvage) / Units × Units Produced	Activity-based
Change	Treatment
Principle (e.g., FIFO → LIFO)	Retrospective restatement (cum. effect in opening R/E)
Estimate (e.g., useful life)	Prospective (current + future only)
Reporting Entity	Retrospective restatement
Error Correction	Retrospective restatement
Add	Subtract
Depreciation, amortization	Gain on asset sale
Loss on asset sale	Amortization of bond discount
Amortization of bond premium	Increase in A/R, inventory, prepaid
Decrease in A/R, inventory, prepaid	Decrease in A/P, accrued expenses
Increase in A/P, accrued expenses
Assets	Liabilities	Equity
Prob. future economic benefits from past transactions	Prob. future sacrifices from present obligations	Residual interest (Assets − Liabilities)
Topic	US GAAP	IFRS
LIFO	Allowed	Prohibited
Inventory write-down reversal	No	Yes (up