EPS/ segment reporting/ disclosures/ non-monetary exchanges

Question 1

for basic EPS, subtract in
- cumulative preferred dividends
- non-cumulative preferred dividends
- dividends in arrears

Answer 1

• current year preferred dividend (regardless if declared)
• declared only
• none

Question 2

what does nature of operations disclose?

Answer 2

products and services
geographic locations
principal markets

Question 3

what is the key phrase for use of estimates disclosures?

Answer 3

“actual results could differ from those estimates”

Question 4

what is the key phrase for significant estimates disclosures?

Answer 4

“reasonably possible for a huge impact”

Question 5

what are the disclosure requirements for risks due to concentrations?

Answer 5

concentration existed at balance sheet date
vulnerability has a risk of a “severe impact” or cause “financial disruption”
reasonably possible

Question 6

what is the key concept for summary of significant accounting policies?

Answer 6

methods, principles, basis, policies (not amount and details)

Question 7

how to treat SUBSEQUENT stock dividends and stock splits?

Answer 7

restatement

Question 8

when reporting a major customer, what needs to be disclosed?

Answer 8

amount of revenue the customer generates

Question 9

what are the 10% tests for segment reporting?

Answer 9

total revenues (external + internal customers)
greater of profit or loss
total assets

Question 10

what is the 75% rule in determining if a segment should be reported?

Answer 10

if 75% of sales were to external customers, then report the segments that add up.

Question 11

what discrete information is not included when reporting segments?

Answer 11

interest expense
income tax expense

Question 12

what are the 3 steps to consider with non-monetary exchanges?

Answer 12

1. find the realized gain/loss (FV-BV)
2. is the gain recognized?
3. basis of the new asset (plug)

Question 13

in an exchange lacking commercial substance, if:
- no boot is received
- less than 25% is boot received
- more than 25% is boot received

how much gain is recognized for each scenario?

Answer 13

• no recognition
• proportional recognition
• full recognition

Question 14

how is the proportionate gain calculated?

Answer 14

proportion = boot/total consideration

proportion * gain (FV - BV of old asset)

Question 15

what is the importance of stock splits and stock dividends date?

Answer 15

stock splits and dividends must be applied to everything prior to its date

Question 16

how is WACSO impacted when shares are issued on 12/31?

Answer 16

not included

Question 17

when is dilutive EPS reported?

Answer 17

when it’s lower than basic EPS

Question 18

what is disclosed in management’s discussion and analysis?

Answer 18

• management’s estimate of sales
• analysis of major competitors
• projection of future market conditions

Question 19

if a non-monetary exchange lacking commercial substance involves boot >25% of total consideration, then:

Answer 19

recognize all gains