F2 Flashcards
Which should be disclosed in the summary of significant accounting policies?
Refinancing of debt subsequent to the balance sheet date
Guarantees of indebtedness of others
Criteria for determining which investments are treated as cash equivalents
Adequacy of pension plan assets relative to vested as cash equivalents
Criteria for determining which investments are treated as cash equivalents
Computing ……. Method is a GAAP method of ……. Should be described in the summary of significant accounting policies
Depreciation principally by straight line
Depreciation
Which of the following should be disclosed in a summary of significant accounting policies
- Concentration of credit risk of financial instruments
- Composition of plant assets
- Basis of consolidation
- Adequacy of pension plan assets in relation to vested benefits
- Basis of consolidation
Measurement bases, accounting principles & methods, criteria, & policies such as basis of consolidation, depreciation methods, revenue recognition, etc.
Summary of significant accounting policies
If a meeting took place during subsequent events evaluation period would a disclosure be required if a proposed acquisition was discussed but rejected?
No, because no event actually occurred
When an entity does not file its financial statements with SEC, what date does the subsequent event evaluation period run through?
When the financial statements are available to be issued
Financial statements that file with SEC are considered to be “issued” when:
FS are in form & format that comply with GAAP
&
FS have been widely distributed to financial statements users
Where there is a deductible to be paid for a subsequent event that happened after year end but before the financial statement, should it be disclosed?
Yes indicating the possible loss of the amount of deductible only if insurance can over the rest of liability
An entity that files its statements with SEC are not required to
Disclose date through which subsequent events have been evaluated
If a note payable is due within a year is refinanced it then becomes a
Non-current asset
When FS are “available to be issued” they must have
FS in form & format that comply with GAAP
&
All approvals necessary for issuance of FE have been received
When FS are considered to be “issued” they must have
FS in form & format that comply with GAAP
&
FS have been widely distributed to FS users
If there is no principal market, then the fair market value should be the
Best price after considering transaction costs
Quoted market prices on a stock exchange for an identical asset are considered to be
Level 1 input, the most reliable of all
Fair value is a …..
- Entity specific measurement
- Measurement that does not consider risk
- Market-based measurement
- Measurement that does not consider restrictions
- Market-based measurement
What are level 3 input to valuation techniques used to measure the fair value of an asset
Unobservable inputs for the asset
Level 2 valuation techniques used to measure the fair value of an asset
Inputs other than quoted market prices that are either observable or unobservable
Uses prices & other relevant information from market transactions involving identical or comparable assets/liabilities to measure fair value
The Market Approach
Uses current replacement cost to measure the fair value of assets
The Cost Approach
The price that would be received when selling an asset/paid when transferring a liability in an orderly transaction between market participants
Fair value for an asset or liability is measured as
Which if the following would not be considered a level 2 observable input used to determine an asset/liability’s fair value?
- Interest rates that are observable at commonly quoted intervals
- Internally generated cash flow projections for related asset or liability
- Quoted prices for identical assets & liabilities in markets that are not active
- Quoted prices for similar assets & liabilities in markets that are active
Internally generated cash flow projections for a related asset or liability
(Internally generated cash flow projection is based on “unobservable” inputs
Fair value includes transportation cost but not
Transaction cost
The price in the principal market for an asset or liability will be the
Fair value measurement
A change from cost approach to market approach of measuring fair value is considered to be what type of accounting change
Change in accounting estimate
A change in valuation technique used to measure fair value is a change in accounting estimate
The fair value of a non financial asset is the
Value at its highest & best use
The market with the greatest volume of activity for the particular asset for which a fair value is being determined would be
The principal market
Which of the following types of entities are required to report on business segments?
- Non public business enterprises
- Joint ventures
- Not-for-profit enterprises
- Publicly-traded enterprises
Publicly traded enterprises
Quantitative threshold for reportable segments test size is?
10%
In financial reporting of segment data, which if the following items is always used in determining a segment’s operating income?
- Income tax expense
- Sales to other segments
- Gain or loss on discontinued operations
- General corporate expense
- Sales to other segments
To be significant enough to report on, a segment must be at 10% of one of the three
Combined revenues (whether inter segment of affiliated customers)
Operating profit (of all segments not having an operating loss)
Identifiable assets
What info 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
Which of the following is the annual report that is filed with the United States Securities & Exchange Commission?
- Form 10-k
- Form S-1
- Form 8-k
- Form 10-q
Form 10-k
Report filed quarterly with SEC by U.S. registered companies
Form 10-Q
Report used to register securities with the SEC
Form S-1
Filed to report major corporate events such as corporate asset acquisition/disposals, changes in accountants, etc.
Form 8-k
In general an enterprise preparing interim financial statements should:
- Allocate revenues & expenses evenly over the quarters, regardless of when they actually occurred
- Defer recognition of seasonal revenue
- Disregard permanent decreases in the market value of its inventory
- Use the same accounting principles followed in preparing its last way annual financial statements
- Use the same accounting principles followed in preparing its latest annual financial statements.
(Unless change in accounting principle is adopted)
Filed semiannually by foreign private issuers & contains unaudited financial statements.
Form 6-k
Filed annually by non-U.S. registrants registered with the SEC and must contain audited financial statements
Form 20-F
Filed annually by specific Canadian companies registered with the SEC & must contain audited financial statements
Form 40-F
XBRL has which of the following features?
XBRL does not require the use of tags
XBRL is interchangeable with SQL
XBRL tags define the data
XBRL is interchangeable with HTML
XBRL tags define the data
US SEC regulations for the financial statements presentation & disclosure requirements of SEC filings can be found in;
Regulation S-X
An XBRL financial statement exhibit is required to be submitted with all of the following SEC filings except:
- Form 10-k
- Forms 3, 4, & 5
- Form 20-k
- Form 6-k
- Forms 3, 4, & 5
For large accelerated filers, the 10-Q is due within …… of the period end
40 days
A company with a large accelerated filer must file its Form 10-Q with US SEC within how many days after end of the period
40 days for large corporations & 45 for small corporations
Maximum number of days after the company’s fiscal year end that the company has to file Form 10-k with the SEC?
- 75 days
- 60 days
- 120 days
- 90 days
75 days
A US public company with worldwide public float of 800 million at end of second quarter of fiscal year is required to file its annual report with the U.S. SEC on:
Form 10-k within 60 days (if it hits 700 million or more then they will have to do 60 days)
A smaller reporting company with respect to market value as established by US SEC includes companies with less than what amount in public equity float?
- $100 million
- $125 million
- $150 million
- $75 million
- $75million
Which of the following is a common modification used to prepare modified cash basis financial statements?
- Capitalizing inventory
- Recognizing revenues when earned
- Recognizing expenses based on the methods & principles used to prepare the tax return
- Matching expenses to related revenues
- Capitalizing inventory
Which of following aje is necessary to convert cash receipts to revenues as reported on an accrual basis?
- Subtract ending contract liability from cash receipts from customers
- Add beginning accounts receivable to cash receipts from customer
- Subtract beginning contract liability from cash receipts from customers
- Subtract ending accounts receivable from cash receipts from customers
- Subtracting ending contracts liability from cash receipts from customers
(Subtract ending unearned (or deferred) revenue
Income tax-basis financial statements statements differ from those prepared under GAAP in that income tax-basis financial statements:
- Do not include non taxable revenues and non deductible expenses in determining income
- Include detailed information about current and deferred income tax liabilities
- Recognize certain revenues and expenses in different reporting periods
- Contain no disclosures about capital & operating lease transactions
- Recognize certain revenues & expenses in different reporting periods
Compared to accrual basis of accounting, the cash basis of accounting understates income by the net decrease during the accounting period
AR. Accrued expenses Yes. No Yes. Yes No. Yes. No. No
No. Yes
(Net decrease in AR means cash collected exceeds revenue recognized on the accrual basis. This would mean higher cash basis income)
(Net decrease in accrued expenses mean cash paid to reduce accrued expenses was more than accrual basis expense record. That means higher expense under cash basis than under accrual basis)
Total liabilities/ total equity =
Debt-to-equity ratio
Capital stock + Retained Earnings =
Equity
Assets - Equity =
Liabilities
[Cash + cash equivalents + Marketable securities + AR (net) ] / current liabilities =
Quick ratio
Current assets / current liabilities =
Current ratio
Sales (net) / average accounts receivable (net) =
Accounts Receivable Turnover
Current Ratio Assets include
Cash + AR(net) + Inventory
Cost of Goods Sold / Average Inventory
Inventory turnover
Net income /average total assets
Return on assets
Ending inventory / ( cost of goods sold/365)
Days in inventory
Sales (net) / average total assets
Asset turnover
Beg inventory + purchases =
Goods availability for sale
Goods available for sale - ending inventory =
Cost of goods sold
Net income / net sales
Net profit margin
Net income - preferred dividends / average common equity
Return on equity
Income before incomes expense & taxes / interest expense =
Times interest earned
Sales / Average working capital
Working Capital Turnover
Income before interest income, interest expense, taxes / sales (net)
Return on sales
With bonus method, when new partner pays more than the book value of capital account purchased the rest goes to
The existing partners
With bonus method, when new partner pays less than the book value of capital account purchased the rest goes to
The new partner
When Hill from the partnership of Hill, Billy, & Yale, the final settlement of Hill’s interest exceeded Hill’s capital balance. Under the bonus method, the excess:
- Was recorded as goodwill
- Reduced the capital balances of Billy & Yale
- Was recorded as an expense.
- Had no effect on the capital balances of Billy & Yale
- Reduced the capital balances of Billy & Yale
Interest causes a
Loss allocation
Under the conversational retail method, the cost of ending inventory uses ratio after
- Markups
- Beginning inventory
- Markdowns
Markups
At cost. At retail
50,000. 75,000
20,000. 30,000
0. 6,000.
70,000. 111,000. = 63% cost/retail ratio
Under the cost retail method, the cost of ending inventory uses ratio after
- Markups
- Beginning inventory
- Markdowns
Markups
At cost. At retail
50,000. 75,000
20,000. 30,000
0. 6,000.
0. (10,000)
70,000. 101,000. = 69% cost/retail ratio
Selling price - cost of completion =
Ceiling price
Ceiling price- normal profit margin =
Market price
Sum of years digits depreciation = for 5 year useful life on 160,000 equipment with 10,000 salvage value first year is?
5/15 * 150,000 = 50,000
Double declining balance depreciation for 5 year useful life on 160,000 equipment with 10,000 salvage value first year?
160,000 * 2 * 1/5 = 64,000
If securities were purchased at par use the purchase price not ………. Value
- Present value
- Fair value
- Carrying value
Fair value
