F2 Flashcards
Items not included in summary of significant accounting policies
- composition & dollar amounts of account balances
- details relating to changes in accounting principles
- maturity dates & amounts for long term debt
- yearly computation of depreciations
Disclosures of Risks & Uncertainties
- Nature of operations
- Use of estimates in preparing financial statements
- Certain significant estimates that are material
- Vulnerability to certain concentrations
Examples of concentrations
- volume of business with someone
- revenue from certain shit
- available supply chain
- market or geographic area?
When should you disclose vulnerability to concentrations
- concentration exists at financial statement date
- there is a risk of near term severe impact
- reasonably possible that event that could cause a severe impact will occur in the near term
Recognized subsequent events
If a litigation or loss on an uncollectible receivable occurs after year end but before financial statements are issued or available to be issued then they are recognized
Evaluation period for subsequent events
SEC companies are through the date the financial statements are issued on Non-SEC are through the date financial statements are available to be issued.
How to account if a significant event that occurs after balance sheet date can be estimated
Disclose the nature of the event along with the estimated financial impact
SEC filers vs non SEC filers
Non SEC filers need to report the evaluation period bullshit while SEC filers don’t need to
Where FV doesn’t apply
- share based compensation
- fv used for leases
FV Valuation techniques
Market approach
Income approach: converts future amounts into single discounted amounts
Cost: replacement cost
FV disclosures
- valuation techniques & inputs used
- uncertainty of FV measurements as of reporting date
- how changes in FV affect performance & cash flows
10% size test for segment reporting
- combined revenue
- combined profit & loss
- combined assets
What must a firm submit to the SEC when it issues new securities
- disclosures about securities being offered
- relationship of new securities to company’s other securities
- info similar to that file in annual filing
- audited financial statements
- description of business risk factors
For 10-k and 10-q rules
- 700 mill large accelerated has 60-40 days
- between 700 and 75 mill is accelerated and has 75-40 days
- under 75 mill has 90-45 days
Form 11-k
Annual report of company’s employee benefit program
Forms 20-F & 40-F
Forms for foreign private issuers; 40-F is for Canadians while 20-F is for everyone else and they are similar to form 10-K
What’s in form 10-K
- Summary of financial data
- Management’s discussion & analysis
- Audited financial statements
Form 6-k
Like form 10-q for foreign private issuers so doesn’t need to be audited
Forms 3,4,5
Forms required to be filed by directors, officers, or beneficial owners of more than 10% of a class so there are no financial statements and are not included in XBRL
Regulation S-X
Sets forth the form & content for interim and annual financial statements
Regulation S-X note
Needs 2 of the most recent balance sheets and 3 of every other financial statement
OCBOA Disclosures
- summary of significant accounting policies
- informative disclosures similar to GAAP for all financial statement items that are similar to GAAP items
- includes notes like related party transactions or subsequent events
More OCBOA disclosures
- titles should be different than GAAP titles
- should explain changes in equity
- no cash flow statement required
Cash basis financial statements
- Statement of cash & equity where cash is the only asset and there are no liabilities; cash equals equity
- Statement of cash receipts & disbursements which shows cash in & out
Common modifications for Modified cash flow basis
- fixed assets
- income tax accrual
- long and short term borrowings and related interest
- inventory
- recording investments at FV and recording unrealized gains & losses
Modified cash flow presentation
- statement of assets and liabilities
- statement of revenues & expenses and retained earnings
Accrual to Cash
^Cash = ^L + ^E - ^OA
Cash to Accrual
^E = ^A - ^L
Cash to Accrual worded questions
- Add ending assets and subtract beginning assets
- Add beginning liabilities and subtract ending liabilities
Asset receivable turnover
Indicates how good firm is at collecting receivables, the higher the better
Days sales in inventory
Indicates average number of days required to collect receivables
Inventory turnover
How quickly inventory is sold, he higher the better
Days in inventory
Average number of days required to sell inventory
Accounts payable turnover
Number to times trade payables turn over during the year; a low turnover may indicate a delay in payment like shortage of cash
Asset turnover
How a company makes effective use of its assets, high ratio indicates effective asset use to generate revenues
Debt to equity
Degree of protection to creditors in case of insolvency; the lower the ratio the better
Times Interest earned
Ability of a company to cover interest charges
Working capital turnover
Sales divided by average working capital (current assets minus current liabilities)
Partnership contributions
Assets at FV
Liabilities assumed are recorded at PV
Partner’s capital account equals difference between FV of contributed assets and PV of liabilities
How to account for investment capital of new partner
Add up all the partner’s capital accounts and then divide the % of new partner minus 1 (If 20% then divide by 80%)
Bonus Method for partners
With bonus method you add up all capital accounts and multiply by % interest for new partner. That amount and by more of less than the partner invested so if that amount is more than what was given the bonus goes to new partner and if less it goes to existing partners all based on their profit/loss ratio
Bonus Method Journal entry
Dr. Cash - amount invested
Dr. Capital A
Dr. Capital B
Cr. Capital C
Goodwill method for partnerships
Multiply contribution of new partner by 1/%(if for one third multiply by 3) then subtract by the sum of everyone’s capital and that is goodwill. You also spread goodwill to existing partners based on profit/loss ratio.
Goodwill method journal entry
Dr. Cash - new partner Dr. Goodwill Cr. Capital A Cr. Capital B Cr. Capital C - amount contributed
Question capital balance for partnerships
- Top row show be net assets and each partner with their %
- Left column should be contributions, then goodwill to get initial capital balances
- Then net income, draws, and ending balance
