Chapter 1 - Income Statements & Financial Reporting

Question 1

Who has legal authority to establish GAAP?

Answer 1

SEC

Question 2

Who determines GAAP?

Answer 2

FASB

Question 3

What is the single source of authoritative non-gov GAAP?

Answer 3

FASB codification

Question 4

Fundamental qualitative characteristics?

Answer 4

Relevance & Faithful representation

Question 5

What is relevance?

Answer 5

“Passing confirms money”

Predictive - confirming - materiality

Question 6

What is faithful representation?

Answer 6

“Completely neutral & free from error”

Completeness - Neutral - freedom from error

Question 7

Enhancing qualitative characteristics?

Answer 7

“Compare & verify in time to understand”

compare - verify - timeliness - understand

Question 8

What makes up the full set of FS?

Answer 8

Statement of financial position (BS)
statement of earnings (IS)
statement of comprehensive income
statement of cash flows
statement of equity

Question 9

What are the IFRS FS assumptions?

Answer 9

going concern & accrual accounting

Question 10

What are the underlying elements of the FS?

Answer 10

“REGL ALE ID”
IS - revenues, expenses, gains, losses
BS - assets, liabilities, equity
Investment to owners

Question 11

What is the presentation order of the IS?

Answer 11

"IDEA"
Income from continuing operations
Discontinued operations
Extraordinary items
Change is accounting principle

Question 12

What’s included in inventory costs?

Answer 12

Purchase price

Freight-in

Question 13

What’s included in selling expense?

Answer 13

Freight-out
Sales salaries & commissions
Advertising & marketing

Question 14

What’s included in G&A expenses?

Answer 14

Officers salaries
Accounting
Legal
Insurance

Question 15

What’s included in discontinued operations?

Answer 15

Impairment loss
G/L from operations
G/L from disposal

Question 16

What are extraordinary items?

Answer 16

Infrequent, unusual, & material

Question 17

Where do you report material infrequent OR unusual items?

Answer 17

Continuing operations as a separate line item (gross)

Question 18

Does IFRS have extraordinary items?

Answer 18

NO

Question 19

What are the accounting changes?

Answer 19

Change in estimate
Change in principal
Change is entity

Question 20

Number of FS sections for a change in accounting (IFRS)?

Answer 20

3 B/S & 2 of everything else

Question 21

Any exceptions to accounting principle change rules?

Answer 21

Change to LIFO and method of depreciation are changes in estimates

Question 22

Does IFRS have a change in accounting entity?

Answer 22

NO

Question 23

What makes up other comprehensive income (OCI)?

Answer 23

"PUFER"
Pension adjustments
Unrealized G/L of AFS security
Foreign currency items
Effective cash flow hedge
Revaluation gain (IFRS only)

Question 24

Comprehensive Income Formula?

Answer 24

CI = NI + OCI

Question 25

What is AOCI?

Answer 25

Total of OCI for all periods

Question 26

What is emphasized for interim reporting?

Answer 26

Timeliness over reliability (unaudited)

Question 27

What are the interim reporting tax rates used for IFRS & GAAP?

Answer 27

GAAP - enacted tax rates only | IFRS - enacted & substantially enacted

Question 28

Who is required to report a business segment?

Answer 28

publicly trade companies

Question 29

What part of the FS is an enterprise not required to show?

Answer 29

Statement of Cash Flow

Question 30

What makes up an operating segment?

Answer 30

Traceable costs to CF's Reviewed by CFO has revenues & expenses

Question 31

Which parts of enterprises are not operating segments?

Answer 31

Corporate headquarters | Pension plans

Question 32

What are the tests for a reportable segments?

Answer 32

10% of revenues, P/L, assets | 75% of total revenues

Question 33

Walk through the multi-step I/S.

Answer 33

Operating activities - revenues & expenses Non-operating activities - other revenues & expenses Unusual OR infrequent items Income taxes (current & deferred)

Question 34

Walk through the single-step I/S.

Answer 34

Total Revenues - Total Expenses

Question 35

What are the exit/disposal costs for discontinued operations?

Answer 35

Involuntary employee termination benefits Costs to terminate contract (not capital lease) Costs to relocate employees

Question 36

What are the two comprehensive income approaches?

Answer 36

Single statement approach (starts with revenues) | 2 statement approach (starts with Net Income)

Question 37

Define with deadlines: 10K - 10Q

Answer 37

10K - filed annually by issuers (60 days large accelerated, 75 days accelerated, 90 days others) 10Q - filed quarterly by issuers (40 days large accelerated, 45 days all others)

Question 38

Define: 11K - 20F & 40F

Answer 38

11K - annual report for EBP's 40F - Foreign equivalent of 10K (Canada) 20F - Foreign equivalent of 10K (other countries)

Question 39

Define: 6K - 8K - Forms 3 4 5

Answer 39

6K - foreign equivalent to 10Q (filed semi-annually NOT quarterly) 8K - major corporate events Forms 3 4 5 - directors/officers own more than 10%

Question 40

Under Regulation SX, how many BS, IS, etc must be included in the FS?

Answer 40

2 - B/S & 3 of everything else

Question 41

What is a development stage enterprise?

Answer 41

Start up Spending on R&D Not a lot of P/L

Question 42

What does the effective income tax rates for operations take into effect?

Answer 42

Foreign tax rates & credits tax planning alternatives anticipated tax credits capital gains

Question 43

What is the purpose of the notes to the financials?

Answer 43

Provide disclosures required by generally accepted accounting principles.

Question 44

According to the FASB conceptual framework, for financial reporting to be useful, it must:

Answer 44

Provide information useful for making business and investment decisions.