F2 Flashcards
1
Q
Info presented in notes to the FS have the purpose of:
A
providing disclosures required by GAAP
2
Q
The summary of significant accounting policies should disclose:
A
polices such as:
basis of profit recognition on long-term construction contracts (revenue recognition)
3
Q
disclosure of ______ is an integral part of the FS
A
accounting polices and all other disclosures
4
Q
For disclosure of accounting policies, the format and location of accounting policies are not fixed by:
A
GAAP
5
Q
Accounting policy disclosures are normally Note 1, but that is a reasonable and very general practice and not a rule of:
A
GAAP
6
Q
For disclosure of accounting policies, disclosure should not be limited to principles and methods peculiar to the industry in which the company operates. __________ should be disclosed
A
All material accounting policies
7
Q
Significant estimates should be disclosed when it is ________ not _____ that the estimate will change in the near term and that the effect of the change will be ______. ______ items are not disclosed.
A
reasonably possible, probable. material, immaterial
8
Q
examples of disclosure requirements related to risks and uncertainties under US GAAP?
A
- disclosure of the use of estimates in the prep of the FS
- disclosure of an entity’s major products or services and its principle markets
- disclosure of concentrations when it is reasonably possible that a concentration could cause a severe impact in the near term
9
Q
The summary of significant accounting policies is typically the first note provided after the FS and will include components such as:
A
- measurement bases,
- accounting principles and
- methods, criteria, and policies such as basis of consolidation, depreciation methods, revenue recognition, etc.
10
Q
Plant asset composition will be described in a specific note related to:
A
PPE
11
Q
Concentration of credit risk relating to financial instruments will be described in a specific note related to:
A
financial instruments
12
Q
The method of determining which assets are considered to be cash equivalents is a:
A
significant accounting policy
13
Q
computing depreciation principally by the straight-line method is a GAAP method of depreciation that should be described in the:
A
summary of significant accounting policies
14
Q
Disclosing the sale of a component of a business is required:
A
in FS footnotes
15
Q
required disclosures under IFRS but not under US GAAP:
A
- statement of compliance with IFRS
- disclosure of judgements made (whether a financial asset is categorized as held to maturity or available for sale)
16
Q
required disclosures under both IFRS and GAAP:
A
- disclosure of all significant accounting policies
- disclosure of estimates made in prep of FS
17
Q
required disclosures under GAAP:
A
- disclosure of all significant accounting policies
- disclosure of estimates made in prep of FS
18
Q
required disclosures under IFRS:
A
- disclosure of all significant accounting policies
- disclosure of estimates made in prep of FS
- statement of compliance with IFRS
- disclosure of judgements made (whether a financial asset is categorized as held to maturity or available for sale)
19
Q
qualitative assessments that could be included in mangagement discussion and analysis:
A
- an analysis of the company’s major competitors
- a projection of future market conditions
- management’s estimate of sales for upcoming year
20
Q
mangagement discussion and analysis goes after:
A
FS and footnotes in form 10-K required to be filed by publicly held corporations with the SEC
21
Q
Disclosure of vulnerability to concentration is required if all of the following criteria are met:
A
- the concentration exists as of the FS date
- the concentration makes the entity vulnerable to the risk of a near term severe impact
- it is at least reasonably possible that the events that could cause a severe impact from the vulnerability will occur in the near term
22
Q
concentrations in the volume of business translated with a particular customer should be:
A
disclosed in notes
23
Q
an entity is considered to be a going concern if it is reasonably expected to:
A
remain in existence and to be able to settle all its obligations for the foreseeable future.
24
Q
Management is required to evaluate whether there is substantial doubt about an entity’s ability to continue within one year after:
A
the date that the FS are issued
25
Going concern is one of several fundamental assumptions in _____. It is the only fundamental assumption in ________.
GAAP, IFRS
26
_____ provides specific guidance about preparing FS and necessary disclosures when liquidation is imminent. _____ doesn't offer guidance on the basis of accounting to use in case of imminent liquidation.
GAAP, IFRS
27
Both IFRS and US GAAP require the evaluation of going concern status be performed by:
management
28
Both IFRS and US GAAP require relevant disclosures when there is doubt about:
an entity's status as a going concern
29
Management believes that plans will be effectively implemented and successful in mitigating the adverse conditions (going concern). How should FS be prepared?
under the going concern assumption basis of accounting with footnote disclosure explaining the conditions that originally raised doubt about entity's status as a going concern
30
The only time a BS is required under the liquidation basis of accounting is when:
the entity's liquidation is imminent. (not a going concern)
31
Consideration should be given to an entity's plans to mitigate the conditions or events that raise substantial doubt about it's ability to continue as a going concern only if:
- if is probable that the plans will be effectively implemented, and
- it is probable that the implemented plans will be successful in mitigating the adverse conditions or events
32
Under IFRS, disclosure is required when _______________________ about the entity's ability to continue as a going concern
management is aware of material uncertainties that may give rise to substantial doubt
33
Under GAAP, disclosure is required when _______________________ about the entity's ability to continue as a going concern
there is substantial doubt (even if doubt is alleviated by management's plans to address it)
34
____________ is required for a reasonably possible loss.
Only footnote disclosure
35
The nature of the contingency should be disclosed as well as the nature of the possible loss or range of loss. If insurance appears to be available for the entire loss except the deductible portion, _____ needs to be included in the footnote
deductible portion of loss
36
Even though event occurred after the date of the FS disclosure is still required since:
statements haven't been issued
37
The entirety of the event occurred after balance sheet date, so there is no need to:
record JE
38
FS have not been issued and the actual amount of financial settlement is known. The amount should be:
included in year end FS and disclosed as a subsequent event
39
For entities that don't file FS with the SEC, the subsequent event evaluation period runs through the date the FS are available to be issued, and that date is defined as:
the date when FS are in a form and format that comply with GAAP and by which all approvals for issuance have been obtained (not necessary that the FS have actually been issued)
40
For entities that file FS with the SEC, the subsequent event evaluation period runs through the date the FS are issued. FS are considered to be issued on the date when:
FS are in a form and format that comply with GAAP and by which the FS have been widely distributed to FS users
41
The subsequent event evaluation for a filer with the SEC is:
through the date that its FS are issued
42
The subsequent event evaluation for a nonfiler with the SEC is:
through the date that the FS are available to be issued
43
__________ are not required to disclose the date through which subsequent events have been evaluated
entities that file FS with SEC
44
__________ are required to disclose the date through which subsequent events have been evaluated and whether:
entities that don't file with SEC, that date is the date that the FS were issued or the date or FS were available to be issued
45
if the resulting liability is larger than the liability originally recorded, there would be a detrimental effect on the company's debt to equity ratio, how?
debt would be higher and equity lower
46
An entity should not recogize subsequent events in the FS that provide info about events that:
didn't exist at the FS date
47
Fair value is a ______ measure
market-specific
48
Fair value is an exit price which is:
the price to sell an asset or transfer a liability
49
Fair value includes ____ costs but not _____ costs
transportation costs, transaction costs
50
The price in the principal market for an asset or liability will be the:
fair value measurement
51
Level ____ inputs are the most reliable Fair value measurements and Level ___ inputs are the least reliable
1, 3
52
Level 1 measurements are quoted prices in active markets for:
identical assets or liabilities only (most reliable)
53
Level 2 measurements are quoted prices in active markets for:
similar assets or liabilities
54
When there is no principal market, the price in the most advantageous market is:
the fair value measurement
55
although transaction costs are not included in the fair value measurement, they are used to determine the most advantageous market as follows:
net price = quoted price - transaction costs
if the net price is the highest it is the most advantageous market and chosen quoted price as the fair value of the asset
56
if Market A were the _______ market for the asset, then this would be the fair value of the asset. However, because there is _______ market, the price in the most advantageous market is the price of the asset
principal, no principal
57
a change in the valuation technique used to measure fair value is a change in:
estimate (per SFAS No 157)
58
Both __________ are acceptable methods of measuring fair value
market approach
| cost approach
59
discounted cash flow of operations is considered to be a Level:
3 input (least reliable)
60
the historical performance and return on investment are considered to be level:
3 unobservable inputs (least reliable)
61
projected cash flows are an unobservable input based on entity assumptions and would be classified as a:
level 3 input
62
quoted stock prices in active stock markets are level:
1 inputs
63
if the net price is the highest, it is the most advantageous market and the ______ is chosen as the fair value of the asset
quoted price
64
Fair value is:
the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market at the measurement date under market conditions
65
Fair value is an exit price, not an entrance price (____ an asset, not ____ an asset)
sell, acquire
66
quoted prices for identical assets and liabilities in markets that are not active are level:
2 inputs
67
internally generated cash flow projections for a related asset or liability would be classified as Level 3 because:
it is based on unobservable inputs reflecting a company's own assumptions about the way the related asset of liability would be priced
68
interest rates that are observable at commonly quoted intervals are level:
2 observable input
69
Level ___ inputs are unadjusted quoted prices for identical assets or liabilities in active markets
1
70
inputs that are principally derived from or corroborated by observable market data are examples of:
level 2 inputs
71
inputs based on the reporting entity's internal data are examples of:
level 3 inputs
72
The principal market is the market with:
the greatest volume of activity for the particulate asset for which fair value is being determined
73
Because the exchange had the greatest volume of purchases in total, the exchange is the:
principal market
74
the fair value of a non financial asset is the value at its:
highest and best use
75
because it rarely buys the commodity in question, the market would be considered:
inactive market
76
Fair value measurement should include all the assumptions that a market participant would make including:
- info about restrictions
| - assumptions about risk
77
A company may apply fair value to financial instruments on an __________, but once elected, fair value measurement will be used until the asset/liability is disposed
instrument by instrument basis
78
a reportable operating segment is one having:
10% of all revenue, including revenue from unaffiliated sales and inter-segment sales
79
what should a public company present about revenues from its reporting segments?
unaffiliated sales and inter-segment sales disclosed separately
80
operating profit by segments is based on the measure of profit reported to the chief operating decision maker. what is included? what is not included?
not included: equity in net income of another company, interest expense, income taxes, general corporate expenses, and gains or losses on discontinued operations (not allocated to divisions)
they may be allocated if that is how the segments report to the chief operating decision maker (traceable)
81
sales to other segments would be used in determining:
a segment's operating income
82
in order to conform to GAAP, financial statements for public business enterprises must report segment info about a company's major customers if:
that customer provides 10% or more of the combined revenue, internal and external, of all operating segments
83
For each reportable segment of an enterprise, both _______ should be disclosed under US GAAP
profit or loss, total assets
| in disclosure questions, if you are not sure, disclose the most
84
For segment reporting under GAAP, if an identified segment's _____ constitute more than 10% of the combined ______ of all operating segments, the segment should be reported. The same rule doesn't apply for:
assets, assets, liabilities
85
______ are required to report on business segments
only publicly traded enterprises
86
if division revenues account for more than 75% of total sales to unaffiliated customers (external sales) then:
no additional reportable segments need to be identified
87
The 10% size test is the qualitative threshold for reportable segments. Any of the three criteria are applicable:
1. reported revenue greater than or equal to 10% of combined revenue 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
88
company determines its segments based on unconsolidated financial results by segment. The absolute amount of income is greater than the absolute amount of loser. because of that:
company uses 10% of total income from segments earning income as the threshold for determining reportable segments
89
since all companies meet at least one of the criteria for the 10% segment reporting then:
all will be reported
(any of them are applicable and can be used differently for each segment)
1. combined revenues
2. operating income
3. identifiable assets
90
Under IFRS and US GAAP, what is disclosed for an entity's reportable segments?
segment profit or loss, segment assets
91
Under IFRS and US GAAP, what is NOT disclosed for an entity's reportable segments?
segment cash flow
92
Under only IFRS, what is disclosed for an entity's reportable segments?
segment liabilities, if such a measure is regularly provided to the chief operating decision maker
93
for interim reporting purposes, costs that benefit multiple periods should be:
allocated equally to those periods (R&D, property taxes)
94
Under Regulation S-x an entity's audited FS filed with the SEC should include 2:
BS for the most recent fiscal years and the statements of income, changes in owners equity, and cash flows for the 3 fiscal years preceding the date of the most recent audited BS
95
in 2002, the SEC approved a deadline of ____ days for Form 10-K "accelerated filers"
75
96
accelerated filer is:
an issuer
- with a public float of greater than or equal to $75 million
- Subject to the Securities Exchange Act's reporting requirements for greater than or equal to 12 months
- that previously filed at least 1 report
- which is not eligible to file quarterly and annual reports on Forms 10-QSB and 10-KSB
97
in 2002, the SEC approved a deadline of ____ days for Form 10-K "large accelerated filers"
60
98
large accelerated filers is:
issuer with public float over $700 million
99
in 2002, the SEC approved a deadline of ____ days for Form 10-K "non-accelerated filers"
90
100
Due to the absence of seasonal fluctuations, _________ is the appropriate period to include in addition to the most recent quarter end on filing of quarterly FS with the SEC on Form 10-Q
the end of the preceding fiscal year
101
Form 8-K is a form required to be filed by all companies registered with the SEC. The form reports on:
major corporate events including:
- corporate asset acquisitions/disposals
- accountant changes
- financial statement changes
- management changes
- changes in securities
102
Form 10-k reports on:
quarterly results of operations
103
XBRL FS exhibit is required to be submitted with a filer's:
- 10-K
- 20-F
- 6-K
because they include filer's FS
104
Form 3, 4 and 5 are required to be filed by:
directors, officers, or beneficial owners of more than 10% of a class of equity securities of a registered company
105
Form 3, 4 and 5 do not contain registered company's FS because:
they aren't filed by the company and so they are not required to present company FS in an exhibit prepared using XBRL
106
The SEC's Interactive Data Rule requires a US public company submitting Form 10-k to present:
FS including BS, statement of comprehensive income, and all footnotes, and any applicable FS schedules, in an exhibit prepared using XBRL
107
Form 11-k is:
the annual report of an entity's employee benefit plan and would include the FS of the benefit plan
108
Form 10-k is:
the annual report of a US registered company and would contain FS prepared using GAAP, MD&A, and financial disclosures
109
Form 20-F is:
the annual report of non-US registrant and would contain FS
110
in 2002, the SEC approved a deadline of ____ days for Form 10-Q "large accelerated filers"
40
111
Form 10-Q is a quarterly report filed within ____ days for large corporations and ____ days for small corporations after the end of the fist three quarters of each fiscal year. It must contain:
40, 45, reviews of interim financial info by an independent CPA
112
________ sets forth the form and content of and requirements for interim and annual FS to be filed with the SEC
Regulation S-X
113
________ sets forth non-financial reporting requirements for various SEC filings used by public companies
Regulation S-K
114
______ sets forth the disclosure requirements for small business issuers
Regulation S-B
115
_______ sets forth rules governing electronic filings
Regulation S-T
116
The entire amount of a gain or loss from sale of fixed assets should be reported during:
period (quarter) incurred
117
Form 6-K is filed:
semiannually by foreign private issuers
118
Form 10-Q is filed:
quarterly by US registered companies
119
Form 40-F is filed:
annually by specific Canadian companies registered with the SEC
120
Which forms contain audited FS?
40-F, 10-K, 20-F
121
Which forms contain unaudited FS?
6-k and 10-Q
122
The effective income tax rates for operations for the full year should reflect:
- anticipated foreign tax rates
- available tax planning alternatives
- effect of other anticipated tax credits
- capital gains rates
- foreign tax credits
123
Form S-1 is:
the report used to register securities with the SEC
124
A 14A proxy statement is a statement required of a firm when:
soliciting shareholder votes. (filed in advance of the annual meeting and is filed with SEC)
125
a small filer has worldwide market value of outstanding common equity held by non-affiliates of less than:
$75 million
126
decrease in prepaid interest is added when calculating accrual basis interest expense because:
a decrease in prepaid interest increases interest expense
127
decrease in interest payable is subtracted when calculating accrual basis interest expense because:
a decrease in interest payable implies that cash interest payments exceeded accrual basis interest expense
128
the amount debited to operating expenses must be adjusted downward by the increase in accrued liabilities and adjusted upward by the increase in prepaid expenses to calculate:
the amount of operating expenses which were paid
129
income tax-basis FS recognize events when:
taxable income or deductible expenses are recognized on the entity's tax return
130
non-taxable income or deductible expenses are shown on the FS and included in the determination of income and become M-1 adjustments to arrive at:
taxable income
131
in FS prepared on the income-tax basis, the nondeductible portion of expenses (such as meals and entertainment) should be included in:
the expense category in the determination of income
132
OCBOA FS should include FS equivalent to:
the accrual basis BS and IS. (statement of cash flows is not required)
133
OCBOA FS disclosures should be similar to:
GAAP FS disclosures
134
common modifications made to cash basis FS:
- recording long-term liabilities
- accrual of income taxes
- capitalization of inventory
135
recognizing expenses based on the methods and principles used to prepare the tax return is done when preparing:
tax basis FS
136
approach for converting from cash to accrual:
1. add increases in current assets
2. subtract decreases in current assets
3. add decreases in current liabilities
4. subtract increases in current liabilities
137
approach for converting from accrual to cash:
1. subtract increases in current assets
2. add decreases in current assets
3. subtract decreases in current liabilities
4. add increases in current liabilities
138
cash ratio:
cash + marketable securities / current liabilities
139
quick ratio:
cash + net receivables + marketable securities / current liabilities
140
working capital turnover:
sales / average working capital
141
using cash to buy inventory would _____ average inventory but _____ COGS
increase, no affect to
142
(decreasing) selling inventory means net sales:
increases
143
times interest earned measures:
the ability of a company to cover interest charges. the greater the ability, the less risk of bankruptcy
144
since new partner is receiving a 25% interest in the partnership, his capital account will be credited with 25% of the total equity of the new partnership. The difference between his contribution and his capital account balance is credited to:
the other partners as a bonus
145
Assets contributed by a partnership (or sole proprietorship) to a corporation in its formation are valued at:
assets fair market value - any related liabilities assumed by the corporation (mortgage note on real property)
146
when a partnership is incorporated with stock, assets fair market value - any related liabilities assumed by the corporation =
common stock + additional paid in capital squeeze
147
bonus paid has the same impact as additional net income, and is shared in:
the old profit and loss ratio
148
under the bonus method, new partners capital account is calculated as:
existing capital balance + new partners investment at fair value = new partnerships capital balances * new partners capital interest = new partners capital balance
149
the positive difference between the new capital account and the investment's fair value would be:
debited to old partners capital accounts based on their profit and loss sharing ratio
150
the negative difference between the new capital account and the investment's fair value would be:
credited to old partners capital accounts based on their profit and loss sharing ratio
151
calculation of goodwill to original partners:
new partners investment / % of total capital = total capital - existing capital balances = goodwill to original partners
152
under good will method, initial capital balance
partners contributions + goodwill = initial capital balance
153
under good will method, ending capital balance
partners contributions + goodwill = initial capital balance + net income - draws = ending capital balance
154
interest credited to capital accounts based on weighted average:
capital account activity * months = dollar months
total dollar months / 12 = weighted average
weighted average * interest rate = interest credited to capital account
155
in accounting for partnership withdrawal, dissolution or admission: ________ increases or decreases the individual partners accounts without changing total net assets of the partnership
bonus method
156
______ increases the individual partners accounts and also changes total net assets of the partnership
goodwill method
157
under the bonus method, the credit to the new partner's capital account is calculated so that the new partner will receive:
proper ownership percentage
(the amount credited to the partners capital account as determined generally is not equal to the amount of the investment)
158
steps when liquidating a partnership and distributing cash:
Step 1: sell other assets for cash: sales price - book value = gain/loss
Step 2: use cash to payoff AP: cash(from sale) - AP = cash balance
Step 3: Allocate loss on sale of assets to partners on 60:40 basis
Step 4: offset smith's loan against his capital account
Step 5: allocate remaining cash to smith and jones based on capital balances
159
The fact that the partners agree to share profits equally does not affect their:
partnership capital accounts from contribution of assets
160
summary of significant accounting policies does not include:
numbers (its a summary)
161
company learns one of its largest customers filed for bankruptcy. It will negatively impact the income statements. The company plans to increase efforts to attract new customers in the hopes of replacing sales lost due to the bankruptcy. They are currently on all loans and has a solid relationship with its financiers. Is there substantial doubt about the entity's abilities to continue operating as a going concern?
no substantial doubt and no disclosure required
162
a customer with past due outstanding invoices filed for bankruptcy after FS date. AFUA for doubtful accounts includes a reserve for 20% of the outstanding balance, but now 100% is estimated as uncollectible. What is the JE required?
Bad debt expense. 80%
| AFUA 80%
163
gain contingency is recorded:
in the year it happened. (no adjusting entry required in the year before if the case started in previous year)
164
historical cost is _____ price
entrance
165
GAAP doesn't revalue:
PPE (IFRS does)
166
land purchased 4 years ago as investment property has increased significantly in value due to tremendous growth in the real estate market. Measurement basis?
historical cost
167
Company's BS includes goodwill from the acquisition of another entity 5 years ago. impairment testing conducted at year end indicated that the carrying value of the goodwill exceeded implied fair value. Measurement basis?
fair value level 3
168
a significant portion of company's cash and cash equivalents balance is comprised of money market funds held at various banks throughout the state. Measurement basis?
fair value level 1
169
PPE Measurement basis?
cost - AD = NBV
land has no AD: historical cost
170
the summary of significant accounting policies may be omitted in what report?
10-Q
171
dividends per share and in total for each class of shares must be disclosed in what report?
10-K
172
income tax expense disclosures are required in what report?
10-K
173
FS and supporting schedules must be presented in an exhibit using XBRL in what reports?
10-K and 10-Q
