Balance Sheet, Going Concern, Interim Financial Reporting, Segment Reporting, SEC Reporting

Question 1

Classified Balance Sheet

Answer 1

Distinguishes between current and non-current assets and liabilities

Question 2

Summary of Significant Accounting Policies

Answer 2

not optional, first or second note to the financial statements

Question 3

IFRS vs US GAAP - notes to financial statements

Answer 3

IFRS - requires disclosures of judgments and estimates that mgt has made
US GAAP - requires disclosure of significant estimates, but does not require the disclosure of judgments

Question 4

Related Party Disclosures

Answer 4

required by US GAAP and IFRS

Question 5

Going Concern

Answer 5

If it is reasonably expected to remain in existence and to be able to settle all its obligations for the foreseeable future.

Question 6

Going Concern Presumption

Answer 6

Under US GAAP, preparation of FS presumes that the reporting entity will continue as a going concern…FS are prepared under the going concern basis of accounting.

Question 7

Imminent Liquidation

Answer 7

If an entity’s liquidation is imminent, FS are prepared under the liquidation basis of accounting.

Question 8

Management’s responsibility with going concern

Answer 8

Required to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern for a reasonable period of time, not to exceed one year beyond the date of the financial statements are issued.

Question 9

No Substantial Doubt

Answer 9

No disclosures related to going concern

FS prepared under the going concern basis

Question 10

Substantial Doubt Alleviated

Answer 10

Financial statements prepared under the going concern basis and should include footnote disclosures:

• primary conditions/events that raised substantial doubt
• Mgt’s eval of the significance of conditions/events
• Mgt’s plans that alleviated the substantial doubt

Question 11

Substantial Doubt NOT Alleviated

Answer 11

FS prepared under the going concern basis but must state in the footnotes that there is substantial doubt about the entity’s ability to continue as a going concern w/in one year of the FS issuance date. Additional footnotes required:

• primary conditions/events that raised substantial doubt
• Mgt’s eval of the significance of conditions/events
• Mgt’s plans that are intended to mitigate adverse conditions/events

Question 12

US GAAP vs IFRS for Going Concern

Answer 12

• US GAAP requires liquidation basis if liquidation is imminent; IFRS does not provide guidance on the basis of accounting if liquidation is imminent.
• US GAAP requires mgt to assess going concern conditions w/in one year of FS issuance date; IFRS requires assessment at least one year from BS date.
• difference in disclosure requirements

Question 13

Interim Financial Reporting

Answer 13

Not required under US GAAP or IFRS, but in the US there is concern with quarterly reports that public companies must file with the SEC.

• Interim FS marked “unaudited”
• Timeliness over reliability
• Match revenues and expenses by quarter

Question 14

US GAAP vs IFRS for Interim FS

Answer 14

IFRS requires a minimum of:
- Condensed balance sheets, condensed statements of comprehensive income, condensed statements of changes in equity, and condensed statements of cash flows

US GAAP does not establish presentation minimums, guidance is provided by the SEC

Question 15

Income Taxes for Interim Reporting

Answer 15

• Income tax expense estimated each quarter.
• IFRS allows the effective tax rate to be estimated using enacted or substantially enacted changes in tax rates.
• US GAAP allows the use of enacted tax rates only.

Question 16

Segment Reporting - Required Disclosures for ALL Public Enterprises

Answer 16

Under US GAAP and IFRS, public businesses must report info on:

• Operating Segments (annual and interim)
• Products and Services
• Geographic Areas
• Major Customers

Question 17

Intercompany Transactions NOT Eliminated for Reporting

Answer 17

Transactions between the segments of an enterprise are not eliminated in a consolidation between the parent company and subsidiaries.

Question 18

Reportable Segment

Answer 18

Operating Segments of an enterprise that meet the criteria for separate reporting.

Question 19

10% Size Test (Quantitative Thresholds for Reportable Segments)

Answer 19

• Revenue: reported revenue is 10% or more of the combined revenue of all operating segments
• Reported Profit or Loss: if the absolute amount of its reported profit/loss is 10% or more of the greater…of the combined reported profit of all operating segments that did not report a loss; or the combined reported loss of all operating segments that did report a loss.
• Assets: assets are 10% or more of the combined assets of all operating segments.

Question 20

75% Reporting Sufficiency Test

Answer 20

Need at least 75% of external (consolidated) revenue reported by operating segments.

Question 21

Segment Profit/Loss Formula

Answer 21

Revenues
Less: Directly Traceable Costs
Less: Reasonably allocated Costs
= Operating Profit (or Loss)

Question 22

Securities Offering Registration Statements form

Answer 22

used when a company issues new securities

Question 23

Form 10-K

Answer 23

Filed annually by US registered public companies. Filing deadline is 60 days after the end of the fiscal year.
Contain financial disclosures, including a summary of financial data, MD&A, and audited financial statements prepared using GAAP.

Question 24

Form 10-Q

Answer 24

Filed quarterly by US registered public companies.
Filing deadline is 40 days after the end of the fiscal quarter.
This form contains unaudited FS prepared using GAAP, interim period MD&A, and certain disclosures.

Question 25

Form 11-K

Answer 25

Annual report of a company’s employee benefit plan(s).

Question 26

Forms 20-F and 40-F

Answer 26

Filed annually by foreign private issuers.
Form 40-F is filed by specific Canadian companies registered with the SEC.
Form 20-F filed by other non-US registrants.
similar to Form 10-K
May be prepared using GAAP, IFRS, or a comprehensive body of accounting principles other than GAAP or IFRS.

Question 27

Form 6-K

Answer 27

Filed semi-annually by foreign private investors.

Similar to Form 10-Q

Question 28

Form 8-K

Answer 28

Filed to report major corporate events

Question 29

Forms 3, 4, and 5

Answer 29

Required to be filed by directors, officers, or beneficial owners of more than 10% of a class of equity securities of a registered company.

Question 30

Regulation S-X: Requirements for Interim FS

Answer 30

• Reviewed by an independent public accountant and review report filed with FS.
• Include most recent fiscal quarter and as of the end of the preceding fiscal year of Balance Sheet, Income Statement, and Statement of Cash Flows

Question 31

Regulation S-X: Requirements for Annual FS

Answer 31

• Audited by independent public accountant and audit report filed with FS.
• Audited FS must include Balance Sheets for 2 most recent fiscal years and Income Statement/Changes in Owner’s Equity/Cash Flows for 3 fiscal years.

Question 32

XBRL (SEC reporting)

Answer 32

XBRL (extensible business reporting language) is a royalty-free, open specification for software that uses XML data tags to describe financial info for business and financial reporting.

Question 33

SEC Interactive Data Rule

Answer 33

Requires US public companies and foreign private issuers that use US GAAP, as well as foreign private issuers that use IFRS, to present FS and any applicable FS schedules in an exhibit prepared using XBRL.