04 Public company reporting

Question 1

Does the Securities and Exchange Commission (SEC) have legal authority to prescribe accounting standards to public companies?

Answer 1

Yes, it has that authority.

Question 2

Does the Securities and Exchange Commission (SEC) have the authority to penalize firms when financial statements are not in accordance with generally accepted accounting principles?

Answer 2

Yes, it may penalize firms.

Question 3

What does the Securities and Exchange Commission (SEC) strive to do?

Answer 3

Ensure that there is adequate information in the public domain before a company issues or trades securities

Question 4

What does the Securities and Exchange Commission (SEC) do?

Answer 4

It administers the U.S. securities laws, most notably the Securities Act of 1933 and the Securities Exchange Act of 1934 as well as others.

Question 5

Within how many days after the end of the quarter does a company need to file the 10-Q?

Answer 5

40 days for large accelerated filers and accelerated filers
45 days for non-accelerated filers

Question 6

Within how many days after the fiscal year end of a large accelerated filer does a 10-K need to be filed?

Answer 6

60 days

Question 7

What information does the 8-K provide?

Answer 7

Significant events affecting the company

Question 8

Where must earnings per share (EPS) be disclosed?

Answer 8

On the face of the financial statements

Question 9

How is basic earnings per share calculated?

Answer 9

(Net income - Preferred dividends) / Weighted average common shares outstanding

Question 10

How is diluted earnings per share calculated?

Answer 10

(Net income available to common adjusted for effects of potential common stock) / (Weighted average common shares + Shares issuable from potential common stock)

Question 11

What does diluted earnings per share (EPS) include?

Answer 11

Includes securities that may become common stock in the future, such as convertible stock and stock options, in addition to actual shares of common outstanding

Question 12

What is an antidilutive potential common stock?

Answer 12

One that increases earnings per share (EPS) when added into basic EPS

Question 13

What is the treatment of antidilutive potential common stock in earnings per share (EPS)?

Answer 13

It is ignored.

Question 14

What is the general rule for stock splits and dividends in the weighted average share calculation?

Answer 14

Treat as outstanding from inception of firm (“AS IF”)

Question 15

What is a simple capital structure?

Answer 15

One in which the corporation has outstanding only:
Common stock or
Common stock and nonconvertible preferred stock

Question 16

What does a complex capital structure include?

Answer 16

Typically includes common stock, along with equity contracts and convertible securities

Question 17

What amount of preferred dividend is subtracted for cumulative preferred stock?

Answer 17

One full year’s dividends regardless of the amount declared or paid

Question 18

What is the accounting effect of a stock split dividend between balance sheet date and issuance?

Answer 18

Adjustment of all earnings per share (EPS) amounts for stock split or dividend

Question 19

When are options antidilutive?

Answer 19

When the option price exceeds the market price

Question 20

What is the term that refers to the following concept?

If a year’s preferred dividend is not paid (skipped), no other dividends may be paid before the skipped dividends (dividends in arrears) are paid.

Answer 20

Cumulative