Balance Sheet, Going Concern, Interim Financial Reporting, Segment Reporting, SEC Reporting Flashcards
Classified Balance Sheet
Distinguishes between current and non-current assets and liabilities
Summary of Significant Accounting Policies
not optional, first or second note to the financial statements
IFRS vs US GAAP - notes to financial statements
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
Related Party Disclosures
required by US GAAP and IFRS
Going Concern
If it is reasonably expected to remain in existence and to be able to settle all its obligations for the foreseeable future.
Going Concern Presumption
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.
Imminent Liquidation
If an entity’s liquidation is imminent, FS are prepared under the liquidation basis of accounting.
Management’s responsibility with going concern
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.
No Substantial Doubt
No disclosures related to going concern
FS prepared under the going concern basis
Substantial Doubt Alleviated
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
Substantial Doubt NOT Alleviated
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
US GAAP vs IFRS for Going Concern
- 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
Interim Financial Reporting
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
US GAAP vs IFRS for Interim FS
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
Income Taxes for Interim Reporting
- 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.
Segment Reporting - Required Disclosures for ALL Public Enterprises
Under US GAAP and IFRS, public businesses must report info on:
- Operating Segments (annual and interim)
- Products and Services
- Geographic Areas
- Major Customers
Intercompany Transactions NOT Eliminated for Reporting
Transactions between the segments of an enterprise are not eliminated in a consolidation between the parent company and subsidiaries.
Reportable Segment
Operating Segments of an enterprise that meet the criteria for separate reporting.
10% Size Test (Quantitative Thresholds for Reportable Segments)
- 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.
75% Reporting Sufficiency Test
Need at least 75% of external (consolidated) revenue reported by operating segments.
Segment Profit/Loss Formula
Revenues
Less: Directly Traceable Costs
Less: Reasonably allocated Costs
= Operating Profit (or Loss)
Securities Offering Registration Statements form
used when a company issues new securities
Form 10-K
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.
Form 10-Q
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.
Form 11-K
Annual report of a company’s employee benefit plan(s).
Forms 20-F and 40-F
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.
Form 6-K
Filed semi-annually by foreign private investors.
Similar to Form 10-Q
Form 8-K
Filed to report major corporate events
Forms 3, 4, and 5
Required to be filed by directors, officers, or beneficial owners of more than 10% of a class of equity securities of a registered company.
Regulation S-X: Requirements for Interim FS
- 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
Regulation S-X: Requirements for Annual FS
- 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.
XBRL (SEC reporting)
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.
SEC Interactive Data Rule
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.
