F1 Flashcards
Relevent
Passing Confirm Money
Faithful Representative
Completed Neutral equals Free of Error
6K
Semi-Annually by foreign issuer
40K
Annually by Canadian issuer
20F
Annually by Non-US registrant register
Under Regulation S-X
Financial Statement include 2 b/s, 3 other
10 Q
Quarterly by US issuer, reviewed by CPA
40 days by large and accelerated filer, 45 days for other
Other Comprehensive Income (non owner transaction)
PUFER: Pension adjustment Unrealized gain and loss AFS securities Foreign currency translation Effective portion cash flow hedge Revaluation surplus( IFRS only)
Comprehensive Income Formula
NI
+OCI
=Comprehensive Income
Net Income includes following items: ( IDE ) A -Income from continuing operation -Discontinued operation -Extraordinary gain/loss
Where Comprehensive Income report?
Comprehensive income can be reported:
-Statement of comprehensive income
OR
-Statement of income and comprehensive income.
Reclassification adjustments must be shown in the financial statement that discloses comprehensive income:
To avoid double counting in comprehensive income items, which are currently displayed in net income.
Reclassification adjustments
Move OCI items from AOCI to Net Income
What is the purpose of reporting comprehensive income?
To summarize all changes in equity from nonowner sources.However, not include investments by stockholders and dividend
What is the purpose of information presented in notes to the financial statements?
To provide disclosures required by generally accepted accounting principles.
Related party disclosures under GAAP
Includes loan to officers
Related party disclosures under IFRS
Includes loan to officers and key management compensation
Estimate disclosure
Significant estimates should be disclosed when it is reasonably possible (not probable) that the estimate will change in the near term and that the effect of the change will be material. Immaterial items are not disclosed.
Reportable operating segment
A reportable operating segment is one having 10% of all revenue, including revenue from unaffiliated sales(external) and from intersegment sales(internal)
What information should a public company present about revenues from its reporting segments?
Disclose separately the amount of sales to unaffiliated customers and the amount of intracompany sales.
Operating profit by segments
is based on the measure of profit reported to the “Chief Operating Decision Maker.”
Interest expense, income taxes, and general corporate expenses are not allocated to the divisions solely for the purposes of segment disclosures
Which is a required enterprise-wide disclosure regarding external customers
Must report segment information about a company’s major customers if that customer provides 10% or more of the combined revenue, internal and external, of all operating segments.
Quantitative Thresholds for Reportable Segment
The 10% “Size” test is the quantitative threshold for reportable segments. Any of the three criteria are applicable:
1) Reported revenue (sales to external customers and intersegment sales) greater than or equal to 10% of combined revenue (internal and external) of all operating segments.
2) Reported profit/loss greater than or equal to 10% of the greater (absolute value) of:
- -Combined profit of all operating segments that did not report a loss.
- -Combined reported loss of all operating segments that did report a loss
3) Assets greater than or equal to 10% of the combined assets of all operating segments.
Under IFRS, which of the following is disclosed for an entity’s reportable segments?
Segment Asset
Segment profit or loss
Segment Liability( IFRS only)
How the corporation should value its inventory in its interim financial statements?
The lower of cost or market method should be applied to interim periods.
Temporary declines in market value that are expected to reverse by the end of the annual period are not recognized in the interim statements.
Only permanent declines are recognized.
How are discontinued operations and extraordinary items that occur at midyear initially reported?
Included in net income and disclosed in the notes to interim financial statements.
Net Income
Includes (IDE)A:
Income from continuing operation
Discontinuing operation
Extraordinary gain/loss
Accounting principle change is Retained Earning item
Change in accounting principle inseparable from a change in estimate
When a change in accounting principle is considered inseparable from a change in estimate, the change is handled as a change in estimate - prospectively. No cumulative effect adjustment is made.
Correction of an error
Retroactive treatment as a prior period adjustment to retained earnings with restatement of prior periods.
Extraordinary loss under U.S. GAAP
Must be both unusual in nature and infrequent in occurrence
Changed from the cash basis of accounting to the accrual basis of accounting
The cash basis for financial reporting is not (GAAP); therefore, it is an error.
Selling expense
Freight out, salary and commission, advertising, rent applicable to sale department
Under U.S. GAAP, a material loss should be presented separately as a component of income from continuing operations when it is:
Gains or losses that are unusual in nature or occur infrequently but not both, are presented as a component of income from continuing operations.
Impairment loss for Discounting continuing operation
The impairment loss is recognized in the year in which the component is classified as held for sale, NOT the year when asset sold.
How should the effect of a change in accounting estimate be accounted for?
In the period of change and future periods if the change affects both.
Change in depreciation method
Considered to be both a change in method and a change in estimate. These changes should now be accounted for as a change in estimate and handled prospectively
Failure to accrue warranty cost
Correction of error–> RE prior period adjustment of opening balance
Change in entity
Financial statements of all prior periods presented should be restated when there is a “change in entity”
Tax treatment for IDEA
I- gross and net of tax
DEA- net of tax
Change in accounting estimate show on F/S
No cumulative effect adjustment is made and no separate line item presentation is made on any financial statement. If a material change is being made, appropriate footnote disclosure is necessary.
General and Administrative expense
Officer’s salaries, accounting, legal, insurance
Inventory cost
Purchase price, freight in
Cumulative effect of a change in accounting principle
If non comparative F/S presented, equals the difference between retained earnings at the beginning of period of the change and what retained earnings would have been if the change was applied to all affected prior periods.
If comparative F/S presented, is equal to the difference between beginning retained earning in the fire period presented and what retained earnings would have been if the new principle had been applied to all prior period.
Examples of extraordinary items
Expropriation of a plant by the government
Prohibition of product line by newly enacted law
Prior period adjustment formula
Correct accounting -Incorrect accounting =Prior period adjustment, before tax * (1-tax rate) =Prior period adjustment, net of tax
Cost associated with exit and disposal activities
Cost to relocate employees
Cost to terminate NON-capital lease
Benefits related to involuntary employee termination
Cost
Extraordinary items under IFRS
IFRS prohibited Extraordinary items, these items will go to Income from continuing operation
A change from direct recognition to the installment method
is a change in accounting principle inseparable from a change in accounting estimate that is treated like a change in accounting estimate, prospectively.
Disclosed in a summary of significant accounting policies
Criteria for determining which investments are treated as cash equivalents.
Property, plant, and equipment is recorded at cost with depreciation computed principally by the straight-line method.
what is the loss treatment from first anti-trust action
Losses arising from a company’s first (and probably “last”) “anti-trust” action are unusual and extraordinary and should be reported as an extraordinary item. Losses resulting from additional costs caused by a strike at a major supplier or even at one’s own company are not extraordinary and should be disclosed as a separate component of “income from continuing operations.”
Calculation of Gain and Loss when have insurance policy
Amount from insurance Co. -deductible -additional cost incurred -carrying amount of asset = gain/loss
Inventory accounting principle change to ==>LIFO
Exception from GR
No cumulative effect adjustment is made.
The change is accounted for prospectively.
The effective tax rate should reflect anticipated:
foreign tax rates and available tax planning alternatives
Inventory losses from “permanent market declines”
are recognized in the interim period, incurred and later, if they “turn-around,” are recognized as gains in a subsequent interim period only to the extent of previously reported losses.
“Temporary” market declines
need not be recognized at interim when a “turn-around” can reasonably be expected to occur before the end of the fiscal year.
A statement of cash flows for a development stage enterprise:
Present financial statements in accordance with GAAP and make additional disclosures such as cumulative amounts from inception for: net losses, deficits, sales and expenses, and cash flows and supplementary data.
Research & development costs in developmental stage of company
100% expense
Enhancing Qualitative
Comparability
Variability
Timeliness
Understandability
Five elements of present value measurement
U VOTE The price for bearing uncertainty Expectations about timing variations of future cash flows Other factors Time value of money Estimate of future cash flow
Form 3 4 5
filed by director, officer, or beneficial owner of more than 10% of class of equity
10K
annually U.S company.
60 days by large, 75 by accelerated filer, 90 by other
If the subsidiary’s functional currency is its local currency
the subsidiary’s financial statements are simply “translated” to the reporting currency. The resulting adjustment is reported as other comprehensive income.
If the subsidiary’s functional currency is not the same as its local currency (the functional currency may be the reporting currency or another currency)
the subsidiary’s financial statements must be “remeasured” into the functional currency. The resulting gain or loss on remeasurement is reported in the consolidated income statement.
