F2 - Deck 2 Flashcards
What is required for a “reasonably possible” loss in terms of financial statement disclosure?
For a “reasonably possible” loss, only footnote disclosure is required. The disclosure should include the nature of the contingency and the possible loss or range of loss. If insurance covers the loss except for a deductible, only the deductible amount needs to be disclosed in the footnote.
When is a subsequent event recognized on the financial statements?
A subsequent event is only recognized on the financial statements if it provides additional evidence about conditions that existed as of the balance sheet date. It occurs after the balance sheet date but before the financial statements are issued.
When must an entity evaluate subsequent events for financial statement filing, and how does it relate to litigation?
An entity must evaluate subsequent events through the date the financial statements are available to be issued. In the case of litigation, if the underlying event occurred within the financial statement year and conditions existed at the balance sheet date, the entity should recognize the financial impact of a possible settlement.
When does the subsequent event evaluation period end for entities not filing with the SEC?
For entities not filing with the SEC, the subsequent event evaluation period ends on the date the financial statements are available to be issued. This is when the financial statements comply with GAAP and all necessary approvals for issuance have been obtained, regardless of whether they have been physically issued.
When does the subsequent event evaluation period end for entities filing with the SEC, and when are financial statements considered issued?
For entities filing with the SEC, the subsequent event evaluation period ends on the date the financial statements are issued. They are considered issued when they comply with GAAP and have been widely distributed to users, without requiring acknowledgment of receipt from shareholders.
What is the subsequent event evaluation period for a “filer” (an entity that files with the SEC)?
The subsequent event evaluation period for a “filer” is through the date that its financial statements are issued. Financial statements are considered issued when they have been widely distributed to users in a form and format that comply with GAAP.
When does an SEC filer subsequent event evaluation period end, and is disclosure of this date required?
SEC filer subsequent event evaluation period ends on the date its financial statements are issued, which is when they are widely distributed in a GAAP-compliant form and format. SEC filer, this date was Year 2. SEC filers are not required to disclose the date through which subsequent events have been evaluated.
What is a subsequent event evaluation period as an entity that does not file with the SEC, and what disclosure is required?
Subsequent event evaluation period ends when the financial statements are available to be issued, which is when they comply with GAAP and all approvals for issuance are obtained. Non-SEC filers must disclose the date through which subsequent events have been evaluated and whether that date is the issuance date or the available to be issued date.
How is the fair value of stock determined if there is no principal market?
If there is no principal market, the fair value of the stock is determined by the price in the most advantageous market, which is the market with the best price after considering transaction costs.
What is the definition of fair value in financial reporting?
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. It is a market-based measure, not an entity-based measure.
What is fair value?
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 current market conditions.
How is fair value measured and applied to financial instruments?
Fair value is measured for a specific asset/liability or a group of assets/liabilities and is a market-based measure. For financial instruments, a company may apply fair value on an instrument-by-instrument basis. Once elected, fair value measurement is used until the asset/liability is disposed of.
What does fair value include and exclude in financial reporting?
Fair value is the price received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It excludes transaction costs but may include transportation costs if location is an attribute of the asset or liability.
How is the fair value of a building determined?
The fair value of a building is the price that would be received to sell it in an orderly transaction between market participants in the principal market, or the most advantageous market if there is no principal market, at the measurement date. The best measurement is typically based on the principal market.
Which market should be used to determine fair value if the principal market cannot be identified?
If the principal market cannot be identified, the most advantageous market should be used to determine the fair value of a financial asset. This is the market that generates the highest net price after considering transaction costs, but these costs are not included in the fair value measurement.
