Balance Sheet & Disclosures Flashcards
earned capital
retained earnings
AOCI
contributed capital
capital stock (preferred and common stock + APIC)
contra-equity accounts
reduces SE (i.e. treasury stock)
notes to F/S
summary of significant accounting policies
remaining notes to F/S
related party disclosures
risk and uncertainties disclosures
summary of significant accounting policies
required under both GAAP and IFRS
- measurement bases used in preparing F/S
- accounting principles/methods
- criteria
- policies
- pricing
summary of significant accounting policies
GAAP vs IFRS
IFRS requires explicit statement of compliance with IFRS
no requirement for GAAP
disclosure of process of applying accounting policies
GAAP vs IFRS
IFRS requires disclosure of judgments AND estimates in applying accounting policies
GAAP requires disclosure of significant estimates ONLY
accounting policies in SSAP
basis of consolidation
depreciation methods
amortization of intangibles
inventory pricing
recognition of profit on LT construction contracts
revenue recognition from franchising or leasing operations
remaining notes to F/S
contain all other information relevant to decision makers, not included in SSAP
- changes in SE
- contingency losses
- contractual obligations (operating leases, off B/S financing)
- post B/S disclosures
related party disclosures
GAAP vs IFRS
both require disclosure of related party transactions…
GAAP, …excluding compensation arrangements, expense allowances, and other similar items in ordinary course of business
IFRS, …including compensation arrangements separately for each category of related party
related parties
- affiliates of an entity
- entities accounted for using the equity method (investments in affiliates/joint ventures)
- parent/subsidiary entities of common parent
- trusts FBO employees
- immediate family members
- owners of more than 10% of voting interest and immediate family
related party
GAAP vs IFRS
IFRS, principal owners are not mentioned as related parties
related party transactions
- sales, purchases, transfers of real/personal property
- services received/furnished
- use of property/equipment by lease
- borrowings, lendings, guarantees
- maintenance of compensating bank balances
- intra-entity billings based on allocations of common costs
- filings of consolidated tax returns
material related party disclosure
GAAP vs IFRS
GAAP: nature of relationship, transaction description/dollar amounts, amounts due to or from related parties, and name of related party
IFRS: same as GAAP PLUS allowance for DA, bad debt expense, and/or write offs from related parties
related party notes/AR
GAAP vs IFRS
must be shown separately from general notes and AR under BOTH frameworks
control relationships
GAAP vs IFRS
GAAP, should be disclosed even if there were no transactions between entities
IFRS, same as GAAP plus disclosure of parent company name and controlling party
compensation arrangements disclosure
GAAP vs IFRS
GAAP: NOT required, but SEC regulations requires it outside F/S
IFRS: required for key management personnel compensation
- ST employee benefits
- post-employment benefits
- other LT benefits
- termination
- share-based payments
disclosure of risks/uncertainties
GAAP vs IFRS
required under GAAP
- nature of operations
- use of estimates in preparation of F/S
- certain significant estimates
- current vulnerability due to certain concentrations
IFRS requirements focus on sources of estimation uncertainty
nature of operations
disclosure of risks/uncertainties
- description of entity’s major products/services and its principal markets/location
- description of relative importance of each business (if operating multiple businesses)
use of estimates in preparation of F/S
disclosure of risks/uncertainties
should include following statement:
“The preparation of F/S in conformity with GAAP requires management to make estimates and assumptions hat affect the reported amounts of assets/liabilities and disclosure of contingent assets/liabilities at the date of the F/S and the reported amounts of revenues/expenses during the reporting period. Actual results could differ from those estimates.”
certain significant estimates
disclosure of risks/uncertainties
if an estimate change is reasonably possible and material, estimate of the effect should be disclosed.
i.e. inventory/equipment, deferred tax asset valuation allowances, capitalized computer software costs, loan valuation allowances, litigation-related obligations, LT obligation amounts
vulnerability due to certain concentrations
disclosure of risks/uncertainties
arises when entity is exposed to risk of loss that could be mitigated through diversification
disclosed if ALL are met:
- concentration exists at F/S date
- concentration makes entity vulnerable to risk of a near-term severe impact (significant financially disruptive effect on normal functioning of entity)
- reasonably possible that events that could cause severe impact will occur in the near term
examples of concentrations
- volume of business transacted with particular customer, supplier, lender, grantor, or contributor
- revenue from particular products, service, or fundraising events
- available supply of resources (materials, labor, services)
- market or geographic area
estimation uncertainty (disclosure of risks/uncertainties for IFRS)
- information about assumptions it makes about the future
- other major sources of estimation uncertainty (at end of reporting period) that have significant risk of resulting in material adjustment to the carrying amount of A&L within next financial year
notes should include details of nature and carrying amounts of A&L at end of reporting period
