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CPA FAR > F1: Standard Setting, Income Statement, and Reporting Requirements > Flashcards

F1: Standard Setting, Income Statement, and Reporting Requirements Flashcards

1
Q

Standard Setting Bodies in the US ~

A

SEC has the legal authority to establish US GAAP
SEC + 3 different bodies have determined GAAP

  1. SEC
    - established by Securities Exchange Act of 1934
    - all companies who issue securities in US must register w SEC
  2. Committee on Accounting Procedure (CAP)
    - part time committee of AICPA that promulgated Accounting Research Bulletins (ARBs)
  3. Accounting Principles Board
    - another part time committee of AICPA
    - issued Accounting Principles Board Opinions and APB Interpretations
  4. Financial Accounting Standards Board (FASB)
    - independent, full time organization
    - determined GAAP since 1973
    - issues a bunch of stuff*
    - 7 full time members who serve for 5 year terms and may be reappointed 1 additional 5 year term
    - Board members must sever connections w firms or institutions before joining the Board
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2
Q

FASB Accounting Standards Codification

US GAAP

A

became single source of authoritative nongovernmental US GAAP
- practices not in the Codification are not GAAP

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3
Q

Authoritative Literature Included in Codification

US GAAP

A

“FEDPRIA”

  1. Financial Accounting Standards Board (FASB)*
  2. Emerging Issues Task Force (EITF) Abstracts and Topic D
  3. Derivative Implementation Group Issues
  4. Accounting Principles Board Opinions
  5. Accounting Research Bulletins
  6. Accounting Interpretations
  7. American Institute of Certified Public Accountings (ACIPA)*
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4
Q

SEC Standards included in the Codification

US GAAP

A

to increase usefulness of the Codification for public companies
“Regulation For Accounting IS Emerging”

  1. Regulation S-X
  2. Financial Reporting Releases (FRR)
  3. Accounting Series Releases (ASR)
  4. Interpretative Releases (IR)
  5. Staff Accounting Bulletins (SAB)
  6. EITF Topic D and SEC Staff Observer Comments
  • just part of the SEC rules and regulations, not all!
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5
Q

Private Company Council (PCC)

US GAAP

A

Financial Accounting Foundation (FAF) created the PCC to improve standard setting for privately held companies
- goal: to establish alternatives to GAAP to make private company financial statements more relevant, less complex, and cost-beneficial

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6
Q

Ongoing Standard Setting Process

US GAAP

A

FASB updated Accounting Standards Codification for new US GAAP issued by FASB and amendments to SEC content with Accounting Standards Update
- process: F1-5

  • Accounting Standards Updates are not authoritative literature, just provides background info, update the codification, and describes basis for conclusions on changes
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7
Q

International Accounting Standards Board (IASB)

A

established in 2001 as part of the International Financial Reporting Standards (IFRS) Foundation

  • purpose: to develop a single set of high quality, global accounting standards
  • 15 full time members, 2 part time members
  • in addition, IFRS also sponsors International Financial Reporting Interpretations Committee (IFRIC)
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8
Q

International Financial Reporting Interpretations Committee (IFRIC)

A

provides guidance on newly identified financial reporting issues that may not have already been addressed in the IFRSs and assists the IASB in achieving international convergence of accounting standards

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9
Q

International Financial Reporting Standards (IFRS)

A

when the IASB was created, it adopted the International Accounting Standards (IAS), issued by old Board of the International Accounting Standards Committee

IASB issued IFRS + other stuff

*IFRS includes: IFRSs, IASs, and Interpretations developed by the IFRIC and former SIC

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10
Q

Ongoing Standard Setting Process

IFRS

A

An IFRS must be approved by at least 9 members of IASB

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11
Q

Conceptual Framework for Financial Reporting

IFRS

A

describes the basic concepts that underline the preparation and presentation of financial statements for external users

  • basic reasoning behind the standards
  • not an IFRS
  • assists IASB in developing IFRSs, evaluating existing ones, and reducing number of alternatives

GAAP vs IFRS

  • IFRS: refer to and consider the application of Conceptual Framework when developing acct policies
  • GAAP: Conceptual Framework can not be applied to specific acct issues
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12
Q

International Convergence of Accounting Standards

A

original goal: single set of high quality international standards that could be used for domestic and cross border

  • FASB and IASB cooperated for years to eliminate differences, but couldn’t do it
  • most projects discontinued and pursuing it’s own agendas

SEC has not announced whether or when IFRS will be incorporated, but probably not

  • but does state an initiative to work to promote higher quality global standards is achievable*
  • but doesn’t mention IFRS
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13
Q

Conceptual Framework underlying Financial Accounting

US GAAP

A

FASB created a conceptual framework (SFAC) that serves as basis for all FASB pronouncements

  • SFAC are not GAAP
  • basic reasonings
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14
Q

SFAC No. 8 Chapter 1: The Objective of General Purpose Financial Reporting

A

Objective: provide financial info that’s useful to the primary users of the financial reports to make decisions

Primary Users

  • external users
  • existing and potential investors, lenders, and other creditors

Financial Info Provided

  • resources/assets, claims against the resources/liabilities, efficiency and effectiveness of management and board
  • GR: financial info should be presented using accrual basis
  • used to assess the reporting entity’s prospects for future net cash inflows* to estimate the value of the entity
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15
Q

SFAC No. 8 Chapter 3: Qualitative Characteristics of Useful Financial Information

A

helps make decisions about the reporting entity based on financial information

Fundamental Qualitative Characteristics
- Relevance and Faithful

Relevance
- if it's capable of making a difference in decisions made by users
- passing confirms money "PCM":
\+ Predictive Value
\+ Confirming Value
\+ Materiality

Faithful Representation (Reliable)

  • “Completely neutral is free from error”
  • doesn’t need to be perfect
  • Completeness: primary FS + notes
  • Neutrality: free from bias
  • Free from Error: no errors in selection/application of process and no errors or omissions in description

Steps to Apply the Fund. Qual. Char.
- F1-9

Enhancing Qualitative Characteristics

  • “Compare and Verify In Time to Understand”
  • comparability, verifiability, timeliness, and understandability enhance the usefulness of the info that is relevant and faithfully represented
  • Cost Constraint: Benefit > Cost
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16
Q

SFAC No. 4: obj of nonbusiness orgs ~

A

what sticks sticks it’s wtv

F1-10

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17
Q

SFAC No. 5: Recognition and Measurement in the Financial Statements

A

recognition criteria and guidance on what and when info should be incorporated in financial statements

  1. Full set of Financial Statements*
  2. Fundamental Recognition Criteria
  3. Measurement Attributes for Assets and Liabilities
    - variety of ways
    - historical cost: pp&e
    - current cost: inventory
    - net realizable value: A/R
    - current market value: marketable securities
    - PV of future cash flows: LT debts “bonds”
  4. Fundamental Assumptions (of GAAP)
    - Entity
    - Going Concern
    - Monetary Unit
    - Periodicity
    - Historical Cost
    - Revenue Recognition Principle: when earned and realized/realizable
    - Matching Principle
    - Accrual Accounting: record rev and exp w/o exchange of cash
    - Full Disclosure Principle: notes “completeness”
    - Conservatism Principle: revenues when earnings is complete (wait on), expenses/losses immediate
    - dont overstate assets or understate liabilities

GAAP vs IFRS
- IFRS only has one assumption- going concern

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18
Q

SFAC No. 6: Elements of Financial Statements

A

“REGL ALE needs ID”

Comprehensive Income

  • difference b/w beginning equity and ending equity other than transactions w owners
  • net income + other comprehensive income

IS: REGL

  • revenues
  • expenses (both are operating)
  • gains: SP > BV
  • losses: SP < BV, impairment/writedown (both are non-operating)

BS: ALE

  • assets
  • liabilities
  • equity: residual interest

excluded from comprehensive income: ID

  • Investments by Owners
  • Distributions to Owners

GAAP vs IFRS
- IASB adds *Capital Maintenance adjustments are increases or decreases in equity from reevaluation or restatement of assets and liabilities

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19
Q

SFAC No. 7: Using Cash Flow Info and Present Value in Accounting Measurements

A

5 Elements of PV Measurement

  • estimate future cash flow
  • expectations about timing of future cash flows
  • time value of money
  • price for uncertainty (credit risk)
  • other factors

PV Computations

  1. Traditional Approach
    - scheduled known payments like contractual
    - PV bonds
    - interest rate selection is paramount
  2. Expected Cash Flow Approach
    - uncertain future payments
    - PV of warranties
    - uses only risk free rate of return
    - consider range of possible cash flows and assign probability to calculate expected value of future cash flow
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20
Q

Uses of IS

A

IS is useful in determining profitabiliy, value for investment purposes, and credit worthiness

  • performance over a period of time
  • also used to predict info about future cash flow based on past performance
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21
Q

Presentation Order of Major Components of Income and Retained Earnings Statement

A

“IDA”
Income from Continuing Operations
- shown twice: income before tax and net income
- includes operating activities and nonoperating activities
- IS

Discontinued Operations

  • reported net of tax
  • IS

change in Accounting Principle

  • GR: reported net of tax
  • in Retained Earnings Statement
  • you can change if it will present financial information more fairly than the old method
  • no more extraordinary items F1-18
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22
Q

Multiple Step Income Statement

A

reports operating revenues and expenses separately from nonoperating and gains/losses
- benefit is enhanced user info

*R1-19

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23
Q

Single Step Income Statement

A

total expenses (including income tax expense) are subtracted from total revenues

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24
Q

Discontinued Operations

A

3 calculations

  1. impairment loss
  2. gain/loss from actual operations
  3. gain/loss on disposal
    - included in period which they occur, not before
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25
Q

Component of an Entity

Discontinued Operations

A

part of an entity, the lowest level for which operations and cash flows can be clearly distinguished from the rest of the entity

US GAAP synonymous terms:
- operating segment, reportable segment, reporting unit, subsidiary, or asset group
IFRS:
- major line of business, geographic area, subsidiary

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26
Q

Business

A

integrated set of activities and assets that is conducted and managed for the purpose of providing a return to investors, owners, members or participants

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27
Q

Nonprofit Activity

A

integrated set of activities and assets managed for purpose of providing benefits other than goods or services at a profit

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28
Q

Held for Sale

Discontinued Operations

A

component of a business (GAAP) or a disposal group (IFRS) is classified as held for sale in a period when ALL criteria is met:

  • management commits to plan to sell
  • available for immediate sale in present condition
  • active program to locate buyer
  • sale is probably and expected to be completed w/i 1 year*
  • sale is actively marketed

IFRS vs GAAP

  • IFRS: individual assets/liabilities must be tested for impairment
  • GAAP: impairment analysis of entire component
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29
Q

Reported as Discontinued Operations IF*

A
  1. has been disposed of or
  2. classified as held for sale

“GEL”
if the disposal represents a strategic shift or will have a major effect on operations. major examples:
- disposal of major Geographic area
- disposal of major Equity method investment
- disposal of major Line of business

30
Q

Discontinued Operations Calculation

A

Items- in period

  1. results of operations of that component
  2. gain or loss on disposal of the component
  3. impairment loss of the component (IFRS does individual asset and liability level)
    - impairment loss recognize loss
    - impairment gain recognize up to previous impairment loss

Depreciation and Amortization
- no longer depreciated or amortized

*example F1-24

Anticipated Future Gains or Losses
- not recognized until they occur

Subsequent Adjustments to Amounts Previously Reported

  • aka change in estimate
  • classified in current period as disc. operations
  • R1-24

Measurement and Valuation

  • component classified as held for sale is measured at lower of:
    a) carrying amount or
    b) FMV less cost to sell (NRV)
31
Q

Exit or Disposal Activities

A

as part of it’s convergence w IFRS, GAAP requires recognition of a liability for the costs associated w an exit or disposal activity

  • downsizing or closing a hub, not discontinued operations
  • recognize liability for PV of future payments for costs

Costs

  • involuntary employee termination benefits
  • costs to terminate a contract that is not a capital lease
  • costs to consolidate facilities or relocating employees

Criteria for Liability Recognition

  • plan is not enough, all criteria must be met:
    a. obligating event must occur (profit < budget)
    b. present obligation to transfer assets (payment- closing hub)
    c. entity has little or no discretion to avoid future transfer of assets or providing services
  • future operating losses expected to be incurred as part of an exit or disposal activity are recognized in periods incurred (diff in costs vs operating losses)

Liability Measurement

  • at fair value
  • may be adjusted in the future for revisions
  • revisions accounted for prospectively

Income Statement Presentation

  • if related to discontinued operation, report in disc. op
  • if not, report in income from continuing operations G/L in unusual/infrequent

Disclosure

  • gotta be disclosed in notes
  • F1-26
32
Q

Accounting Changes

A

3 broad categories

  1. change in accounting estimate: prospective
  2. change in accounting principle: GR retro
  3. change in accounting entity: restate
  • net of tax
33
Q

Changes in Accounting Estimates

A
  • not an error, do not restate prior periods
  • prospective

Events Resulting in Estimate Change

  • affects current and future income from cont. ops.
    1. change in lives of fixed assets
    2. adjustments in year end accrual of officers salaries and/or bonuses
    3. write down of obsolete inventories
    4. material nonrecurring IRS adjustments
    5. settlement of litigation
    6. * changes in acct principles that are inseparable from a change in estimate

Reporting a Change in Estimate

  • if affects future periods, should be disclosed in notes to financial statements
  • if ordinary and immaterial, don’t have to disclose
34
Q

Changes in Accounting Principle

A
  • GR: Retrospective
  • change from GAAP to GAAP or IFRS to IFRS, anything else is an error

Rule of Preferability
- can change only if required or if more fairly presents info

Effects of a Change

  • Direct Effects: adjustments necessary to restate financial statements of prior periods
  • Indirect Effects: differences in nondiscretionary items based on earnings
  • Cumulative Effects*: if noncomparative FSs are being presented, then cumulative effect is diff b/w beg. retained earnings w old method vs beg. retained earnings w new method. If comparative FSs are presented, cumulative effect is diff b/w beg. RE in the first period presented and what RE would be if new method used for all prior periods

Reporting Changes in Accounting Principle
- GR: adjust beg RE in earliest period presented
- in statement of retained earnings, unlike IS like (ID of IDA)
Exceptions:
- to lifo and change in depr. method is prospective

  • if inseparable from change in accounting estimate, report as a component of income from continuing operations and prospectively
35
Q

Changes in Accounting Entity

A
  • retrospective restate

Restatement to Reflect Information for the New Entity
- if comparative FSs presented, all previous should be restated

Full Disclosure
- should be made

IFRS vs GAAP
- IFRS doesn’t include change in acct entity

36
Q

Error Correction

A
  • prior period adjustment, restate
  • non GAAP to GAAP

Comparative FSs Presented

  • if year presented, correct the info in that year
  • if year not presented, adjust beg. RE of earliest year presented NET OF TAX!

Comparative FSs Not Presented
- adj. to opening balance of RE (net of tax)

GAAP vs IFRS
- IFRS has impracticality exemption, GAAP doesn’t

more F1-33

37
Q

Comprehensive Income

A 
non-owner transactions (excludes PIC or Dividends)
net income (per IS) + other noncomprehensive income (OCI)

OCI = “PUFER”- direct to equity bypases IS

  • Pension adjustments
  • Unrealized gains/losses (available for sale securities)
  • Foreign currency items
  • Effective portion cash flow hedges
  • Revaluation surplus (IFRS only, PUFE is both)

Reclassification Adjustments

  • move OCI items from accumulated OCI to the IS
  • avoids double counting

Accumulated OCI

  • just like RE
  • component of equity that includes the total of OCI for the period and previous periods
  • OCI for current period is closed to this account, which is reconciled each period (like NI is closed to RE)
38
Q

Financial Statement Reporting

Comprehensive Income

A

Comprehensive Income presented with the same prominence as the other financial statements that constitute a full set of financial statements
- comprehensive income should NOT be reported on a per share basis

under US GAAP, CI can be presented in:

  1. single statement approach or
  2. two-statement approach

GAAP vs IFRS
- both allow single statement or two statement :)

39
Q

Single Statement Approach

Comprehensive Income

A
  • start w revenue to net income (IS)
  • continue to OCI, net of tax (PUFER)
  • equals comprehensive income

NI + OCI = CI

40
Q

Two Statement Approach

Comprehensive Income

A
  • start w Net Income (per separate IS)
  • continue to OCI, net of tax (PUFER)
  • equals comprehensive income

NI + OCI = CI

41
Q

Other Reporting Issues

Comprehensive Income

A

OCI may be reported either:

  • net of tax or
  • before tax w one amount shown for aggregate income tax expense

Income Tax Expense or Benefit can be disclosed:

  • either on the face of the statement or
  • in the notes

Interim Period Reporting
- shall be reported

All formats must Disclose:
- tax effects of each component
- changes in accumulated balances (may be shown on face or in notes)
- total accumulated OCI in BS as an item of equity
- reclassification adjustments, made to avoid double counting, displayed in NI for current year
e.g. unrealized stuff realized in this year
disclosure for:
a) changes in AOCI balances by component of OCI. Must separately disclose 1. reclassification adjustments and 2. current period OCI
b) significant items reclassified out of AOCI disclosed on face or in notes

F1-37

42
Q

Balance Sheet Overview

A

under both GAAP and IFRS, consolidated BS distinguishes b/w current and noncurrent assets and liabilities
- BS based on liquidity is also permissible

43
Q

Summary of Significant Accounting Policies

Notes to Financial Statements

A

both GAAP and IFRS require a description of all significant policies be included as an integral part of the FSs
- normally first or second note

GAAP vs IFRS

  • IFRS requires explicit statement of compliance w IFRS
  • GAAP doesn’t
Identify and describe
- measurement basis
- accounting principle and methods
- criteria
- policies
- pricing
GAAP vs IFRS
- IFRS disclose judgements and estimates
- GAAP just estimates
  • more F1-39
44
Q

Remaining Notes

Notes to Financial Statements

A

contains all other info that would be relevant to the decision makers

examples F1-40*

45
Q

Related Party Disclosures*** read more

Notes to Financial Statements

A

both GAAP and IFRS require disclosure of related party transactions

Related Parties:

  • affiliates of an entity
  • entities accounted for using equity method
46
Q

Going Concern*

A

if reasonably expected to remain in existence and can settle it’s obligations for the forseeable future

Going Concern Presumption

  • under GAAP, preparation of FSs presumes the reporting entity will continue as a going concern
  • prepared under going concern basis

Imminent Liquidation

  • use liquidation basis
  • no longer a going concern

Management’s Responsibility to Evaluate

  • management must evaluate whether there’s substantial doubt of an entity’s ability to continue as a going concern for time not to exceed 1 year from the date of FSs
  • substantial doubt exists when it’s possible (likely to occur) that the entity won’t be able to meet obligations w/i one year of FS issuance date
  • evaluation for each annual and interim report
  • based on relevant conditions and events known and reasonably knowable at FS issuance date
  • should consider both quantitative and qualitative factors

Mitigating Factors
- if there are conditions that raise substantial doubt, management should consider whether they have plans to mitigate the the conditions to alleviate

No Disclosure If
- no substantial doubt

If Substantial Doubt

  • if there’s substantial doubt, but alleviated bc of management’s plans, then FSs prepared under Going Concern but there must be Footnote Disclosures that include:
    a. primary conditions that raised substantial doubt
    b. management’s evaluation of significance in relation to it’s ability to meet it’s obligations
    c. management’s plans that alleviated the substantial doubt

Substantial Doubt Not Alleviated

  • if substantial doubt, no plan alleviating: continue recording FSs under going concern BUT state in footnotes there is substantial doubt about ability to continue as going concern for next year
  • plus, following Footnotes Disclosures are required (same 3 ^ except plans they tried that didn’t work)

Liquidation Basis
- only when Liquidation is Imminent

GAAP vs IFRS

  • agree management’s responsibility to evaluate going concern and providing relevant disclosures when necessary
  • GAAP uses liquidation basis if imminent, IFRS doesn’t
  • GAAP is 1 year from FSs, IFRS is from BS date
  • GAAP is disclosure when substantial doubt, IFRS is when mgmt is aware of material uncertanties that may give rise to substantial doubt
47
Q

Interim Financial Reporting

A
  • not required under GAAP or IFRS
  • in US, public companies must be registered w SEC and they require it
  • GAAP in recent annual report must be used for interim

Matching Revenues and Expenses

  • by quarter
  • costs that benefit multiple periods should be allocated equally to those periods

Timeliness over Reliability

  • unaudited
  • for interim reporting only

Integral Part of FSs

  • have to be marked “unaudited”
  • GAAP vs IFRS F1-47

Income Taxes
- (year to date income * estimated effective tax rate) and subtract that from provision included in previous quarter
- estimate is best info available at the time
GAAP vs IFRS:
- IFRS allows estimated tax rate using enacted or substantially enacted changes in tax rates
- GAAP allows use of enacted tax rates only

Interim Inventory Valuation ~
- F1-49-50

48
Q

Segment Reporting

A

objective: provide info on business activities and economic environment to better help users of the FSs
- analyze pieces driving the business

Use Same Acct Principles as Main FSs

*Intercompany Transactions Not Eliminated for Reporting

Only for Public Companies
- not for not for profit companies either

49
Q

Required Disclosures for All Public Enterprises

Segment Reporting

A

GAAP and IFRS must report info about a company’s:

  • operating segments (annual and interim)
  • products and services
  • geographic areas
  • major customers
50
Q

Operating Segments

Segment Reporting

A

Definition

  • has its own revenues and expenses
  • operating results are regularly reviewed by Chief Operating Decision Maker and
  • discrete financial info is available (traceable cash flow)
  • includes intercompany sales/ sales to other segments

Not an Operating Segment

  • company headquarters, not generating revenue
  • pension plans

Reportable Segment meet criteria for separate reporting

  • see quantitative thresholds
  • operating segments that exhibit similar long term financial performance may be aggregated into a single segment if ~ more
51
Q

Quantitative Thresholds for Reportable Segments*

A

materiality

10% Size Test (any one)

  • Revenue (internal or external)
  • Profit or Loss
  • Asset

75% Sufficiency Test

  • keep adding operating segments until 75% of external (consolidated) revenue is broken down by segments by operating segment
  • add even if they don’t meet above tests

“All Other Segments” Category
- info about other business activities and other operating segments that don’t meet above criteria are combined and disclosed together

Comparative Reporting~

52
Q

Segment Profit (or Loss) Defined

Segment Reporting

A

*Formula:
revenue (internal and external)
less: directly traceable costs
less: reasonably allocated costs (by CFO)
= operating profit (or loss) for the segment (EBIT)

Items Normally Excluded

  • general corp revenues and expenses
  • interest expense (except financial institutions)
  • income taxes
  • equity in earnings and losses of an unconsolidated subsidiary
  • gains or losses from disc. operations
  • minority interest
53
Q

Reportable Segment Disclosures~

A

F1-54 to 56

54
Q

SEC Reporting Requirements

A

know the forms

SEC requires more than 50 forms that have to be filed to comply with reporting requirements

55
Q

Registration Statement

A
  • when company issues new securities, reg statement includes:
  • disclosures about the securities being offered for sale, relationship of new securities to company’s other securities, info similar to annual filing, audited FSs, description of business risk factors
56
Q

Form 10-K

A
  • must be filed annually by US registered companies
  • filing deadline: 60 days after end of fiscal year for large accelerated filers, 75 for accelerated, 90 days for all others
  • contain financial disclosures, summary of financial data, management’s discussion and analysis (MDandA), and audited financial statements prepared using GAAP

large accelerated filer has worldwide market value of outstanding common equity of $700 million+, accelerated has 75 million+

57
Q

Form 10-Q

A
  • filed quarterly
  • US registered company
  • generally 40 days after end of fiscal quarter for large accelerated, 45 for others
  • includes: unaudited financial statements using GAAP, interim period MDandA, and certain disclosures
58
Q

Form 11-K

A

annual report of a company’s employee benefit plan(s)

59
Q

Forms 20-F and 40-F

A

annual reports for foreign private issuers

  • similar to the 10-K
  • 40-F canadian
  • 20-F others
  • can use GAAP, IFRS, or another recognized (but must reconcile to GAAP)

Form 6-K

  • equivalent of quarterly report
  • but filed semi-annually
60
Q

Form 8-K

A

major corporate event

61
Q

Form 3, 4, 5

A

required to be filed by directors, officers, or owners of more than 10% of a class of equity securities of a registered company

62
Q

Regulation S-X

A

SEC sets forth the “form and content” of and requirements for interim and annual FSs to be filed w the SEC

63
Q

Requirements for Interim Financial Statements

Regulation S-X

A

Review Requirement

  • US: quarterly, Foreign: semiannually
  • unaudited just reviewed

Statements and Periods Presented
- BS, IS, and Statement of Cash Flows

Adjustments for Fair Presentation
- more~

Condensed Financial Statements
- are ok

Disclosures~

64
Q

Requirements for Annual Financial Statements

Regulation S-X

A

Audit Requirement
- audit report must be filed w FSs

Periods Presented

  • BS: 2 years
  • IS and CF: 3 years

Disclosure Requirements
- F1-60

65
Q

SEC XBRL Reporting Requirements

Regulation S-X

A

Definition: Extensible Business Reporting Language- data tags to describe financial information for business and financial reporting
- tells computers how to interpret the context of the text

Key Terms

  • Tag: machine readable code that provide contextual information that allow data to be recognized and processed by the software
  • Taxonomy: specific tags for individual items of business and financial data. XBRL taxonomies include:
    a) XBRL US GAAP Financial Reporting Taxonomy
    b) XBRL IFRS Taxonomy
    c) Global Ledger Taxonomy
    d) Industry Specific Taxonomy
    e) Company Specific Tags
  • Instance Document: XBRL formatted doc that contains tagged data

SEC Interactive Data Rule

  • requires US public companies and IFRS using companies to prepare FSs in an exhibit prepared using XBRL
  • Data Tagging Details: tagged disclosures must include primary FSs, notes, and FS schedules
  • Levels 1-4
  • 30 day grace period
  • posting to Corp Website
66
Q

a material transaction that is infrequent in occurrence but not unusual in nature should be

A

presented separately as a component of income from continuing operations when the transaction results in a gain or loss

67
Q

significant estimates should be

A

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

68
Q

Disclosure of Risks and Uncertainties

GAAP

A
  1. Nature of Operations
    - description of major products or services and principal markets
    - if entity operates multiple business, should describe relative importance of each business
  2. Use of Estimates in Prep. of FSs
    - actual results could differ
  3. Certain Significant Estimates
    - when reasonably possible estimate will change in near term and that the effect will be material
  4. Current Vulnerability Due to Certain Concentrations

GAAP vs IFRS

  • IFRS disclosures are narrower and focus on sources of estimation uncertainty
  • says to disclose info about assumptions and estimates that have sig. risk of resulting in material adj. to carrying amt of assets and liabs w/i the next financial year
69
Q

Interim FSs should include these statements

Reg S-X

A

BS:
- as of end of most recent fiscal quarter
- as of end of preceding fiscal year
~ corresponding fiscal quarter for preceding year not required unless necessary to understand impact of seasonal fluctuations

IS:
- most recent fiscal quarter
- period b/w end of last year and end of most recent quarter
- corresponding periods of preceding year
~ cumulative 12 month per. ended during most recent quarter
~ corresponding preceding period

Cash Flows:
- period b/w end of preceding year and end of most recent quarter
- corresponding period for previous year
~ 12 month period ended during most recent quarter
~ corresponding preceding period

70
Q

Retail

A

FIFO Retail

  • uses net additions
  • cost purchases / retail purchases + net markups - net markdowns = %
  • % * sales = cost cost of sales

Conventional Retail

  • uses total available (cost ratio line)
  • cost beg. inv and purchases / retain beg inv and purchases + net markups = %
  • % * ending inventory = cost ending inventory

CPA FAR (10 decks)

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