F2M4 Flashcards
Notes to Financial Statements
Should this item be included in the Summary of Significant Accounting Policies? “Criteria for determining which investments are treated as cash equivalents”
Yes, determining which assets are considered to be cash equivalents is a significant policy.
Should this be disclosed in a Summary of Significant Accounting Policies? “basis of profit recognition on long term contracts”
“basis” indicates policy, not specific amounts of details. so, Yes.
Are the format and location of the Summary of Accounting Policies, fixed by GAAP?
No, format and location are not fixed. They are generally the first or second note but that is a reasonable and very general practice, not a rule.
Will the company duplicate information provided in the Summary of Accounting Policies note in later notes?
No, additional notes about policies are to present things in greater detail, not duplicated.
qualitative assessments are typically discussed/ included where?
In the Management Discussion and Analysis (MD&A) that proceeds FS and footnotes.
if two different customer make up a significant portion of sales, what should the entity disclose about the two customers?
The amount of the entity’s revenue from each of the two customers.
Disclosure of vulnerability to concentration is required if all of the following criteria are met:
The concentration exists as of the financial statement date.
The concentration makes the entity vulnerable to the risk of a near-term severe impact. (company would be at financial risk)
It is at least reasonably possible that the events that could cause a severe impact from the vulnerability will occur in the near term.
Definition of a Current Vulnerability Due to certain concentrations
arises when an entity is exposed to risk of loss that could be mitigated through diversification.
