About Me
CPA
1 Regulation (REG)
1.1 Ethics, Professional Responsibilities, and Federal Tax Procedures
1.1 1 Professional ethics and responsibilities
1.1 2 Federal tax procedures and practices
1.1 3 Circular 230
1.2 Business Law
1.2 1 Legal rights, duties, and liabilities of entities
1.2 2 Contracts and sales
1.2 3 Property and bailments
1.2 4 Agency and employment
1.2 5 Business organizations
1.2 6 Bankruptcy
1.2 7 Secured transactions
1.3 Federal Taxation of Property Transactions
1.3 1 Basis determination and adjustments
1.3 2 Gains and losses from property transactions
1.3 3 Like-kind exchanges
1.3 4 Depreciation, amortization, and depletion
1.3 5 Installment sales
1.3 6 Capital gains and losses
1.3 7 Nontaxable exchanges
1.4 Federal Taxation of Individuals
1.4 1 Gross income inclusions and exclusions
1.4 2 Adjustments to income
1.4 3 Itemized deductions and standard deduction
1.4 4 Personal and dependency exemptions
1.4 5 Tax credits
1.4 6 Taxation of individuals with multiple jobs
1.4 7 Taxation of nonresident aliens
1.4 8 Alternative minimum tax
1.5 Federal Taxation of Entities
1.5 1 Taxation of C corporations
1.5 2 Taxation of S corporations
1.5 3 Taxation of partnerships
1.5 4 Taxation of trusts and estates
1.5 5 Taxation of international transactions
2 Financial Accounting and Reporting (FAR)
2.1 Conceptual Framework, Standard-Setting, and Financial Reporting
2.1 1 Financial reporting framework
2.1 2 Financial statement elements
2.1 3 Financial statement presentation
2.1 4 Accounting standards and standard-setting
2.2 Select Financial Statement Accounts
2.2 1 Revenue recognition
2.2 2 Inventory
2.2 3 Property, plant, and equipment
2.2 4 Intangible assets
2.2 5 Liabilities
2.2 6 Equity
2.2 7 Compensation and benefits
2.3 Specific Transactions, Events, and Disclosures
2.3 1 Leases
2.3 2 Income taxes
2.3 3 Pensions and other post-retirement benefits
2.3 4 Derivatives and hedging
2.3 5 Business combinations and consolidations
2.3 6 Foreign currency transactions and translations
2.3 7 Interim financial reporting
2.4 Governmental Accounting and Not-for-Profit Accounting
2.4 1 Governmental accounting principles
2.4 2 Governmental financial statements
2.4 3 Not-for-profit accounting principles
2.4 4 Not-for-profit financial statements
3 Auditing and Attestation (AUD)
3.1 Engagement Planning and Risk Assessment
3.1 1 Engagement acceptance and continuance
3.1 2 Understanding the entity and its environment
3.1 3 Risk assessment procedures
3.1 4 Internal control
3.2 Performing Audit Procedures and Evaluating Evidence
3.2 1 Audit evidence
3.2 2 Audit procedures
3.2 3 Analytical procedures
3.2 4 Substantive tests of transactions
3.2 5 Tests of details of balances
3.3 Reporting on Financial Statements
3.3 1 Audit report content
3.3 2 Types of audit reports
3.3 3 Other information in documents containing audited financial statements
3.4 Other Attestation and Assurance Engagements
3.4 1 Types of attestation engagements
3.4 2 Standards for attestation engagements
3.4 3 Reporting on attestation engagements
4 Business Environment and Concepts (BEC)
4.1 Corporate Governance
4.1 1 Internal controls and risk assessment
4.1 2 Code of conduct and ethics
4.1 3 Corporate governance frameworks
4.2 Economic Concepts
4.2 1 Microeconomics
4.2 2 Macroeconomics
4.2 3 Financial risk management
4.3 Financial Management
4.3 1 Capital budgeting
4.3 2 Cost measurement and allocation
4.3 3 Working capital management
4.3 4 Financial statement analysis
4.4 Information Technology
4.4 1 IT controls and security
4.4 2 Data analytics
4.4 3 Enterprise resource planning (ERP) systems
4.5 Operations Management
4.5 1 Strategic planning
4.5 2 Project management
4.5 3 Quality management
4.5 4 Supply chain management
2 1 1 Financial Reporting Framework Explained

1 1 Financial Reporting Framework Explained

Key Concepts

Financial Reporting Framework

The financial reporting framework is a set of rules and guidelines that govern how financial information is prepared, presented, and disclosed. It ensures that financial statements are accurate, reliable, and comparable across different entities and time periods.

Generally Accepted Accounting Principles (GAAP)

GAAP is a comprehensive set of accounting standards and practices developed by the Financial Accounting Standards Board (FASB) in the United States. GAAP provides a consistent framework for financial reporting, ensuring that financial statements are prepared in a manner that is understandable and useful to investors and other stakeholders.

Example: Under GAAP, revenue is recognized when it is earned and realizable, which means that the company has completed the performance obligations and the payment is reasonably assured.

International Financial Reporting Standards (IFRS)

IFRS is a set of accounting standards issued by the International Accounting Standards Board (IASB). IFRS is used in many countries around the world and aims to provide a global framework for financial reporting that enhances comparability and transparency of financial information.

Example: IFRS requires the use of the fair value method for financial instruments, which means that these instruments are reported at their current market value rather than their historical cost.

Regulatory Environment

The regulatory environment includes the laws, regulations, and oversight bodies that govern financial reporting. In the United States, the Securities and Exchange Commission (SEC) is the primary regulator overseeing the application of GAAP. Internationally, the IFRS Foundation oversees the implementation of IFRS.

Example: The Sarbanes-Oxley Act of 2002 is a U.S. law that introduced stringent requirements for financial reporting and corporate governance, aimed at improving the accuracy and reliability of corporate disclosures.

Financial Statements

Financial statements are the primary output of the financial reporting framework. They include the balance sheet, income statement, cash flow statement, and statement of changes in equity. These statements provide a comprehensive view of an entity's financial position, performance, and cash flows.

Example: The balance sheet reports an entity's assets, liabilities, and equity at a specific point in time, providing a snapshot of the entity's financial health.

Examples and Analogies

Consider the financial reporting framework as a "recipe book" that provides detailed instructions on how to prepare financial statements. GAAP and IFRS are like different versions of this recipe book, each with its own set of guidelines and ingredients.

The regulatory environment is like a "chef's supervisor" who ensures that the recipes are followed correctly and that the final dishes (financial statements) meet certain quality standards.

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