Key Terms: Chapter Fifteen
Changes from one acceptable method of accounting to another acceptable method; like straight-line depreciation to a declining balance approach
The private sector group charged with developing accounting standards from 1959 to 1973; primary authoritative pronouncements were known as "opinions"
American Institute of CPAs; an organization whose members are CPAs interested in advancing the accounting profession
The simplest earnings per share number; earnings available to common shares divided by weighted average shares, without factoring in potential dilution
Common stockholders' equity divided by common shares outstanding, to indicate stockholders' equity per share
Part of a business with clearly distinguishable operations; a business segment, unit, subsidiary, or group of assets
An enhancing quality of accounting such that even though different companies may use different accounting methods, there is still sufficient basis for valid comparison
Companies with options, warrants, or convertible bonds and stocks that may result in the issuance of additional shares
Net income plus items of other comprehensive income (e.g., market value adjustments of available for sale securities)
An enhancing quality of accounting such that deviations in outcomes from period to period should be the result of deviations in underlying performance (not accounting quirks)
An earnings per share number; adjusted to reflect the potential effect of dilutive securities
Options, warrants, convertible bonds, convertible stocks, and other items that have the potential to increase the number of shares outstanding
The special income statement reporting of the impact of disposing or abandoning of a component of a business
Dividend per share divided by earnings per share
Dividend per share divided by stock price; also called dividend yield
A concept that relates to income from continuing operations plus/minus discontinued operations and extraordinary items
EPS; generally understood as the amount of income for each share of stock, but is actually better refined as basic and diluted EPS (see those definitions)
An analysts calculation to reflect "earnings before interest and taxes"
An analysts calculation to reflect "earnings before interest, taxes, depreciation, and amortization"
Accounting information should be presented for circumscribed distinct economic units
The gain or loss resulting from a transaction or event that is both unusual in nature and infrequent in occurrence; reported below income from continuing operations
A fundamental quality of accounting such that information must be truthful; complete, neutral, and free from error
Generally accepted accounting principles -- encompass the rules, practices, and procedures that define the proper execution of accounting
In the absence of evidence to the contrary, accountants assume that a business will continue to operate well into the future
International Financial Reporting Standards (IFRS)
The specific accounting rules developed by the International Accounting Standards Board
Separately reported item like discontinued operations, extraordinary items, etc., are to reported net of their specifically related tax effects
Income from continuing operations plus/minus other special items like discontinued operations, etc., but before items of "other comprehensive income"
Public Accounting Oversight Board -- a private-sector, non-profit corporation, charged with overseeing the auditors of public companies
The per share market value of a stock divided by its earnings per share
The idea that accounting standards should articulate broad-based principles rather than specific and detailed rules
To correct errors from prior years; prior financial statements are retroactively changed to make them correct
A fundamental quality of accounting such that information should be timely and bear on the decision-making process by possessing predictive or confirmatory (feedback) value
One of two approaches for converting the financial statements of a foreign affiliate to the reporting currency
The financial statements of prior periods are redone to reflect the correct amounts
A ratio comparing income (net income plus interest) to the average total assets
A ratio comparing income (net income minus preferred dividends) to the average total equity
The idea that accounting standards must be very specific to provide adequate guidance and drive consistency in reporting
"SOX" -- Legislation that imposes stringent controls over reporting and auditing; created the Public Accounting Oversight Board
Securities and Exchange Commission
"SEC" -- regulatory body with which public companies must file and report
An accounting assumption that presumes the currency is not impacted over time by inflation
An enhancing quality of accounting such that information is available in sufficient time to be capable of influence
One of two approaches for converting the financial statements of a foreign affiliate to the reporting currency
An enhancing quality of accounting such that information is clear and concise to those with reasonable business knowledge
An enhancing quality of accounting such that different knowledgeable and independent observers reach similar conclusions