Chapter 10: Corporate Governance and Financial Statement Notes Flashcards
corporate governance
The strategies, behaviors, and structures that support the fulfillment by the board of directors and management of an entity’s citizenship responsibilities and the achievement of its economic performance.
notes to the financial statements / financial review
An integral part of the financial statements that contains explanations of accounting policies and descriptions of financial statement details.
management’s discussion and analysis (MDandA)
A narrative description of the firm’s activities for the year, including comments about its financial condition and results of operations.
significant accounting policies
A brief summary or description of the specific accounting practices followed by the entity.
net pension expense (income)
The estimated annual cost of (or income earned by) providing pension-related benefits to current and former employees based on certain actuarial assumptions. Normally reported in a detailed schedule in the notes to the financial statements.
stock option plan
A plan for compensating directors, officers, and key employees by providing an option to purchase a company’s stock at a future date at the market price of the stock when the option is issued (granted).
accounting change
A change in the application of an accounting principle.
business combination
A merger between two or more firms, or the purchase of one firm by another.
acquisition method
The method of accounting for the purchase of another company that records as the cost of the investment the fair value of the cash and/or securities paid, less the liabilities assumed in the transaction.
contingency
An event that has an uncertain but potentially significant effect on the financial statements.
commitment
A transaction that has been contractually agreed to but that has not yet occurred and is not reflected in the financial statements.
business segment
A group of the firm’s similar business activities; most large firms have several segments.
management’s statement of responsibility
A discussion included in the notes to the financial statements describing management’s responsibility for the financial statements.
five-year (or longer) summary
A summary of key financial data included in an organization’s annual report; it is not a financial statement included in the scope of the independent auditors’ report.
