F2 M1 Notes to Financial Statements

Question 1

Which of the following should be disclosed in a summary of significant accounting policies?
A. Composition of sales by segment
B. Basis of profit recognition on long-term contracts
C. Future minimum lease payments in the aggregate and for each of the five succeeding fiscal years
D. Depreciation expense

Answer 1

B

The only policy in this question is the basis answer, the other disclosures are accounting details

Question 2

Significant estimates should be disclosed when? (2 requirements)

Answer 2

When it is reasonably possible that the estimate will change in the near term and that the effect of the change is material

Question 3

The summary of significant accounting policies is typically the first note provided after the financial statements and will include components such as:

Answer 3

Measurement bases
Accounting principles and methods
Criteria
Policies such as consolidation, depreciation methods, revenue recognition, etc.

Question 4

Computing depreciation principally by the straight-line method is a GAAP method of depreciation that should be disclosed where?

Answer 4

In the summary of significant accounting policies

Question 5

Which one requires disclosures of judgements made in the preparation of financial statements? GAAP or IFRS, both or neither

Answer 5

IFRS

Question 6

Which one requires disclosure of all significant accounting policies? GAAP or IFRS, both or neither

Answer 6

Both

Question 7

Which one requires a statement of compliance with applicable accounting principles? GAAP or IFRS, both or neither

Answer 7

IFRS

Question 8

Footnote disclosures should include:
A. An analysis of the company’s major competitors
B. A projection of future market conditions
C. Information about changes in stockholders’ equity
D. Management’s estimate of sales for the upcoming year

Answer 8

C

Question 9

Information that is not pertinent to a company’s _____ is not included in the footnotes (i.e. excerpts from the minutes of a board of directors’ meeting)

Answer 9

Financial statements

Question 10

Disclosure of vulnerability to concentration is required if all of these criteria are met (3 criteria)

Answer 10

The concentration exists as of the financial statement 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

Question 11

A public entity sells steel for use in construction. One of its customers accounts for 43 percent of sales, and another customer accounts for 40 percent of sales. What should the entity disclose in its annual financial statements about these two customers?
A. The payment terms of accounts receivables due from each of the two customers
B. The amount of the entity’s revenue from each of the two customers
C. The names of the two customers
D. The financial condition of the two customers

Answer 11

B