Chapter 4: Financial Statement Disclourse Flashcards
When is an operating segment reportable?
1) Revenue needs to be at least 10% of the combined segment revenue AND/OR
2) Net income/loss is at least 10% of the greater of (a) combined net income of all profitable segments or (b) combined net loss of all unprofitable segments AND/OR
3) assets are at least 10% of the total assets
What are subsequent events and when do they occur?
Events or transactions that occur AFTER the balance sheet date (our point in time snapshot) but BEFORE the issuance of the financial statements
When there are two non-principle markets to measure an asset, which one would you chose? Do you adjust for transaction costs?
The most advantageous market. Transaction costs are not included in the FMV.
What are the Level 1 inputs in the Fair Value hierarchy (ASC 20)?
Level 1 inputs - Most reliable
- Unadjusted quoted prices
- Active markets
- Identical assets/liabilities
What are the different valuation techniques?
- Market approach
- Income approach
- Cost approach
How are discontinue operations and material unusual or infrequently occurring items that occur at midyear initially reported?
They are included in net income and disclosed in the notes to interim financial statements. They are not prorated over the year.
What should be reported for geographic areas, if feasible?
(1) external revenues attributed to the home country, (2) external revenues attributed to all foreign countries, (3) material external revenues attributed to an individual foreign country, (4) the basis for attributing revenues from external customers, and (5) certain information about assets.
What are required disclosures for each reportable segment?
(1) revenues from external customers and other operating segments,
(2) interest revenue and expense,
(3) depreciation,
(4) depletion,
(5) amortization,
(6) unusual items,
(7) equity in the net income of equity-based investees,
(8) income tax expense or benefit, and
(9) other significant noncash items.
What are the Level 2 inputs in the Fair Value hierarchy (ASC 20)?
Level 2 inputs - observable
- Quoted prices for similar items in active market
- Quoted prices for similar items in inactive market
- Observable inputs - not quoted prices
What are the Level 3 inputs in the Fair Value hierarchy (ASC 20)?
Level 3 inputs - least reliable
- Unobservable inputs given no observable inputs
- “Best” information available
- Often company’s own data
When can recoveries on inventory market value be recognized?
Recoveries of market value may only be recognized to the extent of previous losses.
Interim period tax expense equals
the estimated annual effective tax rate, times year-to-date “ordinary income,” minus the tax expense recognized in previous interim periods.
What does the income fair value approach based its valuation methods on?
Based on current market expectations about future amounts, e.g. earnings or cash flows.
What is a market participants?
They are not related parties?
