F1 Financial Reporting Flashcards
M1 - M4: covers B/S, I/S, C/F; EPS and Public Co.; S/E
What is the basic EPS formula?
(NI - Cumulative PS dividend) / (Average CS outstanding)
When PS dividends are cumulative, whether they are declared or paid is not relevant.
When are stock options considered out of the money?
When the excersice price exceeds the market price of the stock per share. This is antidilutive and means DEPS will be the same as BEPS.
What is the max number of days an accelerated filer has, after their company’s FY end, to file Form 10-K with the SEC?
An accelerated filer is identified as an issuer with a public float > $75M and has 75 days to file Form 10-K.
Large accelerated filers have floats > $700M and file 10-K within 60 days.
Non-accelerated filers have annual revenues < $100M and must file 10-K within 90 days.
When is the filing of the 10-Q form with the SEC due for Large Accerlerated and Accelerated Filers?
Both are required to file the 10-Q within 40 days of the period end.
Non-accelerated filers are required to file form 10-Q within 45 days of period end.
How is TS cost method treated for gain/loss?
Gains and losses on treasury stock transactions are never recorded on the income statement.
Gains are recorded by increasing APIC - TS.
Losses are recorded by first eliminating any balance in APIC - TS and then decreasing retained earnings.
Are stock dividends recorded as dividend income?
No, a stock dividend only increases the number of shares owned.
How are issued stock dividends and stock splits calculated under the current year weighted average shares outstanding method for basic EPS?
They are not calculated, and instead are considered to be outstanding the entire year, regardless of what date in the year they were issued.
When calculating the number of CS shares outstanding, what should you keep in mind for purchased shares, reissued shares, and stock splits?
Regardless of when shares are purchased or reissued, they are considered treasury shares and should be considereing wholly outstanding the entire year. Similarly, stock splits are considered outstanding the entire year too.
When do you translate exchange rates?
When the company is a U.S. company importing goods in euro payment, for example, its gains and losses will be recorded in U.S. dollars. Lastly, if the exchange rates are quoted in euros, they must be translated into U.S. dollars. This requires $1/euro rate from the two dates mentioned in the question (e.g., transaction date and balance sheet date), taking that euro rate difference and multiplying it by the euro transaction price.
Explain the unique qualities of the treatment of treasury stock on a firm’s F/S.
- When a firm repurchases its shares of stock, it may reissue this treasury stock at a reissue price above or below its repurchase price depending on market and firm specific factors.
Explain in-the-money and out-of-the-money when it comes to comparing the average market price of a company’s stock against the strike price for warrants outstanding. How does this affect adjustments needed for diluted EPS?
- If a warrant’s strike price is out-of-the-money, this means the strike price is greater than the average market price of the stock. No adjustments for DEPS is needed.
- Inversely, when a warrant’s strike price is in-the-money, it means the strike price is lesser than the average market price of the stock. This requires an adjustment for DEPS.
How do you calculate the amount of dividends payable to C/S shareholders when there are fully participating P/S shareholders?
1) P/S shares x % of cumulative P/S x par value per P/S share
2) C/S shares x same cumulative % x par value of C/S share ([since P/S is fully participating and C/S doesn’t have cumulative %])
3) Whatever remaining declared dividends, use the total weighted relation of par value ([without cumulative percentage]) to find the C/S ratio
4) add 2 & 3
How would the purchase of TS affect S/E and EPS?
It would decrease S/E and the number of outstanding shares, thus increasing the amount of EPS.
