5.5: Other Required Disclosers Flashcards

1
Q

What are some key components often included in a company’s supplemental disclosures?

A

Contingencies and provisions: Material events with uncertain outcomes.

Accounting policies: Explanation of valuation methods and basic assumptions for inventory, amortization, investments, etc.

Contractual obligations: Specific restrictions/covenants attached to assets or liabilities.

Additional detail: Expanded details on specific SFP (Statement of Financial Position) line items.

Subsequent events: Events after the SFP date.

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2
Q

Define “contingency” in accounting.

A

A contingency is an existing situation where uncertainty exists about whether a gain or loss will occur, and its resolution depends on future events (ASPE).

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3
Q

What is a “provision” under IFRS?

A

A provision is a liability with uncertain timing or amount under IFRS. It is recognized when it is probable and measurable.

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4
Q

How do contingencies differ under IFRS and ASPE?

A

IFRS: Contingencies are disclosed when probable economic benefits are seen as likely.

ASPE: Threshold for recognizing a loss contingency is higher, requiring high chance of occurrence.

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5
Q

Why are accounting policies included in supplemental disclosures?

A

To inform users of financial statements about the methods and assumptions used for key areas like inventory valuation, amortization, and investments, to better understand their impact on net income and ratios.

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6
Q

What is the “full disclosure principle”?

A

The basis for including additional information in financial statements, ensuring that the information is important enough to influence the decisions of an informed user.

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7
Q

What should be disclosed regarding contractual obligations?

A

Essential provisions of guarantees, lease contracts, pension obligations, stock option plans, and any relevant restrictions or covenants, if they significantly impact the company’s financials.

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8
Q

What is the accountant’s ethical responsibility when disclosing contractual obligations?

A

Accountants must weigh ethical considerations to ensure stakeholders’ interests are fairly reflected, sometimes needing to limit information to avoid misleading others.

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9
Q

What are subsequent events?

A

Transactions or events occurring after the date of the financial statement that materially affect the company’s financial position.

These are categorized as events providing evidence of conditions either before or after the SFP date.

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10
Q

How are subsequent events classified?

A

Events providing further evidence of conditions existing at the date of the SFP.

Events indicating conditions that occurred after the financial statement date.

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