F-1 Financial Reporting Flashcards
What does the PUFI Acronym stand for, and where do you apply it?
- Pension Adjustments
- Unrealized Gains & Losses (on Available-for-Sale securities and hedges)
- Foreign Currency Adjustments (Translations)
- Instrument Specific Risk (Changes in fair value)
Applied when qualifying transactions to OCI (Other Comprehensive Income). (The above are considered OCI)
What is the journal entry to record the issuance of shares for property?
Dr. Property (Asset) @ Market Value
Cr. Common Stock @ Par Value
Cr. APIC @ Gain (Market Value - Par Value)
- Property is put on the books at the market value of the stock exchanged
What is the journal entry to record the issuance of property (Inventory) dividends?
Dr. Retained Earnings @ Market Value
Cr. Inventory @ Carrying Value
(Cr) Dr. (Gain)/Loss @ (Market Value - Carrying Value)
What is the journal entry to record the issuance of a small stock dividend?
A small stock dividend is considered 20% or less.
Dr. Retained Earnings @ Market Value
Cr. Common Stock @ Par
Cr. APIC @ Gain (Market Value - Par Value)
What is the journal entry to record the issuance of a large stock dividend?
A large stock dividend is considered 20-25% or more. (Really 25%, but 20-25% is left to judgement)
Dr. Retained Earnings @ Par Value
Cr. Common Stock @ Par
What is the primary difference between the Cost Method and Par Value Method?
Cost Method - Gains/Losses are only calculated when resold
- Gains/Losses = Reissue Price - Repurchase Price
- A Gain happens when you reissue shares for more than what you repurchased them for
PV Method - Gains/Losses are only calculated when repurchased
- Gains/Losses = Original Selling Price - Repurchase Price
- A Gain happens when you repurchase the shares for less than what you originally sold them for
What is the journal entry to record the issuance of 10,000 shares, $10 par value, sold for $15 per share?
Dr. Cash $150,000 (MV x # of Shares)
Cr. Common Stock $100,000 (PV x # of Shares)
Cr. APIC - CS $50,000 (Market Value - Par Value x # of Shares)
What are the similarities between the Cost Method and the Par Value method?
- Gains (Credits) never increase Retained Earnings
- Losses (Debits) decrease APIC first, and then Retained Earnings if APIC Credit balance is not high enough
Under the Par Value Method, what is the journal entry to record the loss upon repurchase of shares?
Cr. Cash @ Market Value
Dr. Treasury Stock @ Par Value
Dr. APIC - CS @ (Original Selling Price - Par Value)
Dr. APIC - TS @ (Repurchase Price - Original Selling Price)
*Note if there is no APIC - TS balance to pull from, then:
Dr. Retained Earnings @ (Repurchase Price - Original Selling Price)
From top to bottom - list the flow of a multiple-step income statement, including discontinued operations.
Next, convert that into a single-step statement of comprehensive income.
Net Sales (sales - sales returns/discounts)
- COS/COGS
—————-
Gross Profit (Margin)
- Operating Expenses
- Depreciation/Amortization
—————-
Operating Income
+- Nonoperating (Gains) and (Losses)
—————-
Pretax Income
- Income Tax Expense
—————–
Net Income (from continuing operations)
+- Discontinued Operations (net of tax)
—————–
Net Income
+- OCI (Other Comprehensive Income)
—————–
Comprehensive Income
In regard to Foreign Currency exchange, what is the direct method?
The direct method is the domestic price of one unit of another currency.
I will “directly” adjust my currency to equal 1 of yours
E.g. Home currency is USD
$1.47 = 1 euro
In regard to Foreign Currency exchange, what is the indirect method?
The indirect method is the foreign price of one unit of the domestic currency.
E.g. Home currency is USD
$1.00 = 0.68 euros
What is Other Comprehensive Income (OCI)?
The change in equity from one period to the next from everything other than owner transactions
+- PUFI Items
+- Reclassification Adjustments
- Includes all changes in equity during a period except those resulting from investments by owners and distributions to owners
- Excludes dividends and treasury stock transactions
What is the 2-statement approach to preparing a statement of comprehensive income?
An income statement followed by a separate statement of comprehensive income that begins with net income
What are the 3 key parts of the Form 10-K?
1) Part II, Item 7: “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (MD&A)
2) Part II, Item 7A: “Quantitative and Qualitative Disclosures about Market Risk”
3) Part II, Item 8: “Financial Statements and Supplementary Data”
What is the 10-K filing deadline for large accelerated filers?
($700M market value)
60 days
What is the 10-K filing deadline for accelerated filers?
($75-700M market value & $100M revenue)
75 days
What is the 10-K filing deadline for all other registrants?
($100M revenue or less)
90 days
What is the 10-Q filing deadline for accelerated and large accelerated filers?
40 days
What is the 10-Q filing deadline for all other registrants?
($100M revenue or less)
45 days
What are the 3 key parts of the Form 10-Q?
1) Part I, Item 1: “Financial Statements”
2) Part I, Item 2: “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (MD&A)
3) Part I, Item 3: “Quantitative and Qualitative Disclosures about Market Risk”
What is the formula to calculate Basic EPS?
(Net Income - Preferred Dividends) / WACSO
- Income available to shareholders = Net Income - Preferred Dividends
- Weighted average number of common shares outstanding (WACSO)
Preferred Dividends are stated as 2 types - Noncumulative or cumulative. How do you calculate preferred dividends in each type?
Cumulative = Number of preferred shares x Par Value x Rate
Noncumulative = declared
How are stock dividends and stock splits treated when calculating WACSO?
Retroactively adjusted as if they occurred at the beginning of the period
e.g. 2-for-1 stock split = 1,000 change in shares = 1,000 x 2 = 2,000 shares retroactively adjusted, then treated like it didn’t happen
What is the formula to calculate Diluted EPS?
Step 1) Test each potentially dilutive security to make sure it is dilutive before incorporating into Diluted EPS formula
Step 2)
Diluted EPS = (Income available to the common stock shareholder + Interest on dilutive securities) / WACSO (Assuming all dilutive securities are converted to common stock)
*Note - preferred dividends are not subtracted because the preferred shares are assumed to be converted into common shares
