FAR 1 - Balance Sheet and Disclosures Overview

Question 1

Define notes to financial statements?

Answer 1

Both U.S. GAAP and IFRS require that a description of all significant policies be included as an integral part of the financial statements - Usually note 1 or note 2.

Question 2

Difference between notes to financial statements for U.S. GAAP and IFRS?

Answer 2

IFRS requires you have a note saying you are in compliance with IFRS. U.S. GAAP does not.

Question 3

Summary of significant accounting policies include what?

Answer 3

1) Measurement basses used in preparing the financial statements
2) Accounting principles and methods
3) Criteria
4) Policies
5) Pricing

Question 4

What are included in significant accounting policies? What is not included in significant accounting policies?

Answer 4

Accounting policies include:

1) Basis of consolidation
2) Depreciation methods
3) Amortization of intangibles
4) Inventory pricing
5) Accounting for recognition of profit on long-term construction contracts
6) Recognition of revenue from franchising or leasing operations

Items not included in accounting policies:

1) Composition of accounts and amounts in dollars of account balances
2) Details relating to changes in accounting principles
3) Dates of maturity and amounts of long-term debt
4) Yearly computation of depreciation, depletion, and amortization

Question 5

Describe difference of judgments and estimates between U.S. GAAP and IFRS?

Answer 5

IFRS requires disclosure of judgments and estimates.

U.S. GAAP only requires disclosure of significant estimates.

Judgment - determining whether financial assets are held-to-maturity securities

Question 6

What are in remaining notes to the financial statements?

Answer 6

Defined as remaining notes that contain all other information relevant to decision makers (notes used to disclose facts not shown in body of financial statements or summary of significant of accounting policies

1) Changes in stockholders’ equity - capital stock, pic, re, ts, stock dividends
2) Marketable securities disclosure - unrealized gains and loses
3) Contingency losses
4) Contractual obligation
5) Pension plan description
6) Post-balance sheet disclosures