CPA FAR key terms

A body of interrelated objectives and fundamentals issued by the FASB that guides how accounting standards are developed and how transactions are reported when no specific standard applies.

A fundamental qualitative characteristic meaning the information can make a difference in users' decisions by helping them predict future outcomes or confirm and correct prior expectations.

A fundamental qualitative characteristic requiring that reported amounts be complete, neutral, and free from material error, so the depiction matches the economic substance of what it claims to represent.

The presumption that an entity will continue operating long enough to carry out its planned activities, which justifies presenting assets and liabilities on a basis other than liquidation values.

Recording revenues when earned and expenses when incurred regardless of the timing of cash receipts and payments, which generally measures performance better than counting only cash flows.

The change in equity during a period from transactions and other events and circumstances from nonowner sources; it equals net income plus other comprehensive income.

Gains, losses, revenues, and expenses that GAAP requires to bypass net income, such as foreign currency translation adjustments, certain pension adjustments, and unrealized holding gains on available-for-sale debt securities.

The portion of a subsidiary's net assets and earnings not owned by the parent, reported as a separate component of consolidated equity rather than as a liability.

Income available to common shareholders divided by the weighted-average number of common shares outstanding during the period, with no adjustment for potential dilution.

A per-share amount that reflects the potential dilution from options, warrants, convertible securities, and other contracts that could increase shares outstanding, computed using the treasury stock or if-converted method.

A component or group of components disposed of or held for sale that represents a strategic shift with a major effect on operations and financial results, reported separately in the income statement net of tax.

A correction of an error in previously issued financial statements, recorded by adjusting the opening balance of retained earnings and restating the prior periods presented.

Events occurring after the balance sheet date but before statements are issued or available to be issued; those evidencing conditions that existed at the balance sheet date are recognized, and others are disclosed.

A three-level ranking of the inputs used to measure fair value: quoted prices in active markets for identical items, other observable market data, and unobservable entity-developed assumptions.

An operating segment that meets a quantitative threshold, such as ten percent of combined revenue, profit or loss, or assets, and therefore must be disclosed separately in the notes.

The income tax expected to be paid in future periods because of temporary differences in which taxable amounts will arise when the related asset is recovered or the related liability is settled.

A promise in a contract with a customer to transfer a distinct good or service, which is the unit of account used to decide when and how much revenue is recognized.

An entity's obligation to transfer goods or services for which consideration has already been received or is unconditionally due, presented separately from receivables on the balance sheet.

The amount of consideration an entity expects to be entitled to in exchange for promised goods or services, adjusted for variable consideration, significant financing components, and noncash consideration.

A lessee's asset representing the right to use an identified underlying asset for the lease term, measured initially at the lease liability plus initial direct costs and prepayments, less lease incentives.

A lease in which the lessee effectively obtains control of the underlying asset, for example because ownership transfers or the term covers most of the asset's economic life, producing separate interest and amortization expense.

An existing condition involving uncertainty about a possible loss that will be resolved by future events; it is accrued when the loss is probable and reasonably estimable and otherwise disclosed.

The excess of consideration transferred over the fair value of identifiable net assets acquired in a business combination; it is not amortized but is tested for impairment at least annually.

A write-down required when the carrying amount of an asset or asset group held and used exceeds the undiscounted cash flows expected from it, with the loss measured at fair value.

Accounting for an investment that gives the investor significant influence, under which the carrying amount is adjusted for the investor's share of investee earnings or losses, dividends, and other equity changes.

The actuarial present value at a measurement date of pension benefits attributed to employee service already rendered, computed using assumed future compensation levels and discount rates.

Compensation delivered as stock options, restricted stock, or similar awards, measured at fair value at the grant date and recognized as expense over the period the employee must provide service.

Long-lived assets or a disposal group expected to be sold within one year, measured at the lower of carrying amount or fair value less cost to sell, and no longer depreciated or amortized.

Funds used to account for core government services, namely the general, special revenue, capital projects, debt service, and permanent funds, reported using modified accrual accounting.

Funds that report business-type activities, namely enterprise and internal service funds, using full accrual accounting and an economic resources measurement focus.

Funds that hold resources in a trustee or custodial capacity for parties outside the government, such as pension and investment trusts and custodial funds, reported using accrual accounting and excluded from government-wide statements.

The accounting basis used by governmental funds, under which revenues are recognized when measurable and available and expenditures when the related liability is incurred.

The question of what a fund's operating statement measures, such as current financial resources for governmental funds versus total economic resources for proprietary and government-wide reporting.

The statement of net position and statement of activities, which report the primary government as a whole on a full accrual basis, split between governmental and business-type activities.

Required narrative that precedes the basic financial statements and gives an objective overview of the government's financial position, results, and significant changes using current and prior year data.

The difference between assets plus deferred outflows and liabilities plus deferred inflows in a governmental fund, classified as nonspendable, restricted, committed, assigned, or unassigned based on the constraints on resources.

The residual in government-wide and proprietary fund statements, computed as assets plus deferred outflows minus liabilities plus deferred inflows, presented in components reflecting capital assets, restricted resources, and unrestricted amounts.

A required schedule or statement that compares the original and final appropriated budget with actual results on the budgetary basis for the general fund and major special revenue funds.

A use of net assets by a government that applies to a future reporting period, such as deferred amounts on debt refundings, grants paid in advance, and certain pension contributions.