Balance Sheet and Disclosures Overview

Question 1

Disclosure Overview - list the Personals and Business Entities that are considered to be “Related Parties” in a Related Party Transaction.

Answer 1

3 Personals :

• Affiliates
• Management
• Principle owners (more than 10%)

3 Business Entities:

• Subsidiaries
• Trusts and special Funds
• Equity Method Investments

Question 2

Disclosure Overview - What is the required disclosure for Related Party Transactions under both the US GAAP and IFRS ?

Answer 2

GAAP

1- transaction description ( amounts and more)
2- A/R and N/R at year end
3- Control Relationship

IFRS

Same as above plus
4- Key employee compensation
5- Bad debt expense and allowance for bad debt on employee loans

Question 3

Disclosure Overview - US GAAP requires the disclosure of risk and uncertainties that stem out of 4 major areas , what are they ?

Answer 3

Disclosure of risk that stem out of

1- Nature of operation

2- Use of Estimates in financial statements

3- Certain Significant Estimates: when it is reasonably possible that an estimate will change in the near future and the effect of the change will be material.

4- Vulnerability due to certain concentrations

Question 4

Balance Sheet - Define both “Assets” and “Liabilities”

Answer 4

Assets: are probable future economic benefits obtained or controlled by an entity as a result of past events.

Liabilities: are probable future sacrifices of economic benefits arising from present obligations of an entity due to particular past transactions.

Question 5

Disclosure Overview - What is the “Summary of Significant Accounting Policies” and how is it seen by both GAAP and IFRS.

Answer 5

“Summary of Significant Accounting Policies” is a description of all significant accounting policies used by the company. This description is seen by both GAAP and IFRS as an Integral part of the reported financial statements, usually included as the first or the second note to the statements.