F-1 2013

Question 1

Name the single source of authoritative nongovernmental US GAAP

Answer 1

The FASB “Accounting Standards Codification” (ASC)

Question 2

The term “International Financial Reporting Standards” includes what standards?

Answer 2

International Accounting Standards (IAS), International Financial Reporting Standards (IFRS), IFRIC Interpretations, SIC Interpretations

Question 3

Who are the primary users of general purpose financial reports?

Answer 3

Existin and potential: Investors, Lenders, Other creditors

Question 4

Name the pervasive constraint on the information provided in financial reporitng.

Answer 4

Cost Constraint: The benfits of reporting financial information must be greater than the costs of obtaining and presenting the information.

Question 5

Name the fundamental qualitative characteristics of useful financial information.

Answer 5

Relevance and Faithful Representation

Question 6

Name the three elements of relevance.

Answer 6

Predictive value, Confirming value, Materiality

Question 7

Name the three elements of faithful representation.

Answer 7

Neutrality, Completeness, Freedom from error

Question 8

Name the enhancing qualitative characteristics of financial information.

Answer 8

Comparability, Verifiability, Timeliness, and Understandability

Question 9

According to SFAC #5, what should a full set of financial statements include?

Answer 9

Statement of Financial Posiition (the balance sheet), Statement of Earnings (the income statement), Statement of Comprehensive Income, Statement of Cash Flows, Statement of Changesin Owners’ Equity

Question 10

What is the difference between realization and recognition?

Answer 10

Realization: When sold and converted to cash (or claims to cash); Recognition: When recorded in the financial statements

Question 11

List the 10 elements of financial statements according to SFAC #6. (CREG and LALEID)

Answer 11

Comprehensive Income, Revenues, Expenses, Gains and Losses, Assets, Liabilities, Equity (of Net Assets), Investments by Owners, Distributions to Owners

Question 12

List the 6 elements of financial statements according to the IASB Framework.

Answer 12

Assets, Liabilities, Equity, Income (revenue and gains), Expenses (expenes and losses), Capital maintenance adjustments

Question 13

Name he 5 elements of present value measurement per SFAC #7? (EVTUO)

Answer 13

Estimate of future cash flow, Exoectations about timing Variations of future cash flows, Time value of money (the risk-free rate of interest), The price for bearing Uncertainty, Other factors (e.g., liquity issures and market imperfections)

Question 14

Descibe the expected cash flow approach for present value computations.

Answer 14

Considers a range of possible cash flows and assigns a (subjective) probability to each cash flow in the range to determine the weighted-average, or “expected,” future cash flow

Question 15

What is the presentation order of the major components of an income and retained earnigns statement? (IDEA)

Answer 15

Income Statement: Income (or loss) from continuing operations, Income (or loss) from Discontinued operations, Extraordinary items. Retained Earnings Statement: Cumulative effect of a change in Accounting principle

Question 16

The gain (loss) from discontinued operations can consist of….

Answer 16

An impairment loss, a gain (loss) from actual operations, and a gain (loss) on disposal

Question 17

In what period are the following reported: An impairment loss? A gain (loss) from actual operations? A gain (loss) on disposal?

Answer 17

All are reported in the period in which they occur

Question 18

In reporting discontinued operations, how is a “component” of an entity defined under US GAAP and IFRS?

Answer 18

US GAAP: 1. An operating segment, 2. A reportable segement, 3. A reporting unit, 4. A subsidiary, 5. An assist group IFRS: 1. A separate major line of business or geographical area of operations, 2. A subsidiary acquired exclusievely with a view to resale

Question 19

How do we account for subsequent increases in the fair value of a discontinued component?

Answer 19

A gain is recognized for the subsequent increase in fair value minus costs to sell (but not in excess of the previously recognized cumulative loss). The gain is reported in the period of increase.

Question 20

What types of costs are associate with exit and disposal activities?

Answer 20

Involuntary employee-termination benefits, Costs to terminate a contract that is not a capital lease, Other costs associated with exit or disposal activities

Question 21

Define extraordinary items.

Answer 21

Material in nature, Of a character significantly different from the typical or customary business activities (unusual), Not expected to recur in the foreseeable future (infrequent), Not normally considered in evaluating the ordinary operating results of an enterprise. Key Words: Unusual and infrequent. Remember: Extraordinary items are recognized under US GAAP but not IFRS

Question 22

List some examples of extraordinary items.

Answer 22

The abandonment of, or damage to, a plant due to an infrequen earthquake or an infrequent flood. An expropriation of a plant by the government. A prohibition of a product line by a newly enacted law or regulation.

Question 23

Name the three types of accounting changes.

Answer 23

Change in an accounting principle, Change in accounting estimate, Change in reporting entity.

Question 24

How is a change in accounting principle reported?

Answer 24

Cumulative effect of change is included in the retained earnings statement as an adjustment of the beginning retained earnings balance of the earliest yer presented. Prior-period financial statements are restated, if presented.

Question 25

What are the special changes in an accounting principle? How are special changes in accounting principle reproted?

Answer 25

A change to LIFO from another method of inventory pricing under US GAAP. Any other change in which a cumulative effect adjustment is considered impractical to calculate. Special changes are reported prospectively (like a change in estimate).

Question 26

How is a change in an accounting estimate reported?

Answer 26

Prospectively. The effect is show in the current and/or future periods that are affected by the change. Financial statements are not restated.

Question 27

Under US GAAP, how is a change in the accounting entity reproted?

Answer 27

All current and prior period financial statements presented are restated.

Question 28

How are error corrections reported?

Answer 28

Reported as prior period adjustments to retained earnings and all comparative financial statements presented are restated.

Question 29

Define comprehensive income.

Answer 29

Change in equity (net assets) that results from revenue, expenses, gains, and losses during a period, as well as any other recognized changes in euqity that occur for reasons other than investments by owners and distributions to owners.

Question 30

Identify 5 items include in other comprehensive income. (PUFER)

Answer 30

Pension adjustments, Unrealized gains and losses on available-for-sale securities, Foreign currency translations that are designated as economic hedges of a net investment in a foreign entity, Effective portions of cash flows hedges, Revaluation suprluses (IFRS only)

Question 31

List the 3 formats acceptable for reporting comprehensive income. Which format is prohibited under IFRS?

Answer 31

Statement of Comprehensive Income (single-statement approach). Statement of Income followeed by separate Statement of Comprehensive Income (two-statement approach), Component of the Statement of Owners’ Equity (prohibited under IFRS, will be prohibited under US GAAP for public companies as of 12/15/11 and for nonpublic companies as of 12/15/12)

Question 32

List some dislcosure requirements for comprehensive income.

Answer 32

Tax effects of each component included in current “Other Comprehensive Income”, Changes in the accumulated balances of components of “Other Comprehensive Income”, Total accumulated other comprehensive income, Reclassification adjustments between other comprehensive income and net income.

Question 33

Identify the contents of the Summary of Significant Accounting Policies note to the financial statements.

Answer 33

Summary of Significant Accounting Policies. Identify and describe: Meaurement bases used in preparing the financial statements, Principles and methods, Criteria, Policies, Pricing

Question 34

Describe the related party disclosures required uner US GAAP and IFRS.

Answer 34

Material related party transactions, Related party notes/accounts receivable, Control relationships. Note: IFRS requires disclosure of key management compensation. US GAAP does not require this disclosure.

Question 35

What are the US GAAP disclosure requirements for risks and uncertainties?

Answer 35

Nature of operations, Use of estimates in preparing the financial statements, Significant estimates, Current vulnerability due to certain concentrations.

Question 36

What are the guidelines for interim reporting?

Answer 36

Use same accounting principles that were used in the most recent annual report. Allocate expenses to the interim period benefited. Revenues are recognized in the period in which they are earned and realized or realizable. A total for comprehensive income in condensed financial statements of interim periods.

Question 37

What income tax rate is used in interim financial reporting?

Answer 37

Use best estimate of effective tax rate to be applicable for full fiscal year on quarterly statements.

Question 38

Name the 4 required disclosures for segments of an enterprise.

Answer 38

Operating segments, Products and services, Geographic areas, Major customers

Question 39

Define operating segment.

Answer 39

Distinct revenue-producing components of the enterprise about which separate financial informaiton is proudcced internally, and whose operating results are regularly reviewed by the enterprise. Determined using a “management approach.”

Question 40

Name 2 quantitative thresholds used in identifying reportable operating segments.

Answer 40

10% “Size” test, 75% “Reporting Sufficiency” test

Question 41

Describe the 10% test for identifying reportable segments.

Answer 41

Revenue: Reported revenue, including both sales to external customers and intersegment sales or transfers, is 10% or more of the combined revenue, internal and external of all operating segments. Reported profit or loss: The absolute amount of its reported profit or loss is 10% or more of the greater, in absolute amount, of….The combined reported profit of all operating segments that did not report a loss, or The combined reproted loss of all operating segments that did report a loss. Assets: Assets are q0% or more of the combined assets of all operating segments. Note: Must meet only one of the above.

Question 42

What is the 75% test for identifying reportable segments?

Answer 42

Combined external (consoldiated) revenue of all reportable segments must be at least 75% of the total consolidated revenue of the entity. The practical limit is 10 segments, but this is not a precise limit.

Question 43

What are the disclosure requiremetns for reportable operating segments?

Answer 43

For each reportable segment, the entity msut report: Identifying factors, Products or services, Profit or loss details, Asset details, Liability details (IFRS only), Measurement criteria, Reconciliations

Question 44

Define development-state enterprise.

Answer 44

Enterprise that devotes substantially all of its efforts to establishing a new business and either planned principal operations have not commenced or no significant revenue has been generated therefrom.

Question 45

Indicate any special accounting treatement for development-state enterprises.

Answer 45

Same generally accepted accounting principles as established operating enterprises, with additional disclosures: Identify statements as those of a development-stage enterprise; Accumulated losses identified as “deficit accumulated during development stage”; In the Income Statement, show revenue and expenses, and cumulative total of both amounts from company’s inception; In the statement of cash flows, include cumulative amounts of cash inflows and outflows from enterprise’s inception and current amounts of cash inflows and outflows for each period presented; Issue a separate statements stockholders’ equity, indicating shares issued, date of issuance, dollar amounts assigned, and noncash consideration, if any.

Question 46

What is the date of an entity’s transition to IFRS?

Answer 46

The date of the opening balance sheet.

Question 47

Describe the Form 10-K and the Form 10-Q. What level of assurance must be provided with the financial statements submitted in these forms?

Answer 47

Form 10-K: Filed annually by US registered companies, includes a summary of financial data, MD&A, and audited financial statements prepared using US GAAP. Form 10-Q: Filed quarterly by US registered companies, inclues unaudited (reviewed) financial statements, interim MD&A, and certain disclosures.