FAR 1D - Public Entities Flashcards

1
Q

๐Ÿ•’ What are the filing deadlines for an Accelerated Filer?

A

โœ… 10-K: Within 75 days of year-end
โœ… 10-Q: Within 40 days of quarter-end
โœ… Criteria: $75M-$700M public float

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2
Q

๐Ÿ•’ What are the filing deadlines for a Non-Accelerated Filer?

A

โœ… 10-Q: Within 45 days of quarter-
end

โœ… 10-K: 90 days

โœ… Criteria: Less than $75M public float

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3
Q

๐Ÿ“œ What are the main sections of a 10-Q?

A

โœ… Part 1 (Financial Information):

Item 1: Financial Statements ๐Ÿ“Š
Item 2: MD&A (Management Discussion & Analysis) ๐Ÿข
Item 3: Market Risk Analysis ๐Ÿ“ˆ
โœ… Part 2 (Other Information): Includes legal proceedings, risk factors, etc.

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4
Q

๐Ÿงฎ How does a stock repurchase affect shares outstanding?

A

โœ… Reduces shares outstanding
โœ… Conversely, shares converted from preferred stock increase shares outstanding

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5
Q

๐Ÿ”„ How do you adjust shares in an EPS calculation?

A

โœ… Adjust for stock splits retroactively as if they happened at the beginning of the period
โœ… For shares issued during the year, adjust by months left/12

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6
Q

๐Ÿ“œ What are the main sections of a 10-K?

A

โœ… Item 7: MD&A (Company performance analysis)
โœ… Item 7A: Market Risk (Interest rate, FX, inflation risk)
โœ… Item 8: Financial Statements

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7
Q

๐Ÿ“‰ How are inventory losses recorded

A

โœ… Recorded when market value declines
โœ… Can be recovered up to the amount of previously recognized losses

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8
Q

๐Ÿ“Š How do you calculate Basic EPS?

A

โœ… Net Income - Preferred Dividends
โœ… Divided by Weighted Average Common Shares Outstanding

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9
Q

๐Ÿ“ˆ How do you calculate Diluted EPS?

A

โœ… Net Income - Preferred Dividends + Convertible Security Adjustments (Interest, Tax Shield)
โœ… Divided by Weighted Average Common Shares Outstanding, adjusted for conversions

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10
Q

๐Ÿฆ How does a stock split impact EPS calculations?

A

โœ… Treated retroactivelyโ€”adjust all shares as if the split occurred at the beginning of the period

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11
Q

๐Ÿ’ต How are convertible bonds treated in Diluted EPS?

A

โœ… Bond interest (net of tax) is added back to net income
โœ… Additional shares from conversion are added to the denominator

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12
Q

๐Ÿฆ How are preferred dividends treated in EPS calculations?

A

โœ… Always deducted from Net Income for Basic EPS
โœ… Ignored in Diluted EPS if the preferred stock is assumed converted

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13
Q

๐Ÿ“Š What is important about convertible shares in Diluted EPS?

A

โœ… Always check the conversion ratio & multiply correctly to adjust shares outstanding
โœ… If conversion is assumed, no need to adjust net income unless it affects interest or dividends

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14
Q

๐Ÿข How are subsidiary securities convertible into the parent companyโ€™s stock treated?

A

โœ… Potential common shares for Diluted EPS

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15
Q

๐Ÿ”„ How do discontinued operations impact interim reporting?

A

โœ… Reported separately, net-of-tax, on the income statement
โœ… Must also be disclosed in the notes

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16
Q

๐Ÿ•’ What is the key emphasis of interim financial statements?

A

โœ… Timeliness over faithful representation

17
Q

๐Ÿ“Š How are temporary inventory losses handled in interim reporting?

A

โœ… Can be ignored if expected to recover by year-end

18
Q

๐Ÿ“† How should interim period financials be viewed?

A

โœ… As an integral part of the annual period

19
Q

๐Ÿ“œ What are examples of disclosures required in MD&A (10-K Item 7, 10-Q Item 2)?

A

โœ… Company Overview
โœ… Market Conditions
โœ… Results of Operations (GAAP vs. Non-GAAP metrics like net sales, gross profit, SG&A, etc.)
โœ… Liquidity & Capital Resources (Cash Flow, Loans, etc.)
โœ… Critical Accounting Policies & Estimates (Only in 10-K, referenced in 10-Q)
โœ… Recent Accounting Pronouncements

20
Q

๐Ÿ“ˆ What are examples of disclosures in Market Risk Analysis (10-K Item 7A, 10-Q Item 3)?

A

โœ… Interest Rate Risk
โœ… Foreign Currency Risk
โœ… Inflation Risk

21
Q

How are preferred dividends treated in Basic EPS?

A

โœ… Cumulative Preferred: Subtract dividends due (regardless if declared) from Net Income. ๐Ÿ”„๐Ÿ’ฐ
โœ… Non-cumulative Preferred: Subtract dividends only if declared during the period. ๐Ÿ“†๐Ÿ’ธ

22
Q

Do preferred dividends affect diluted EPS calculations?

A

โ€ข Convertible Preferred Shares:
โœ… Do NOT subtract preferred dividends if shares assumed converted. ๐Ÿ”„๐Ÿ“ˆ
โœ… Add new common shares from assumed conversion to denominator. ๐Ÿ“Š๐Ÿ‘ฅ
โ€ข Non-convertible Preferred Shares:
โœ… Treated same as Basic EPS (subtract dividends if cumulative or declared). โŒ๐Ÿ“‰

23
Q

When do stock options have a dilutive effect in EPS calculations?

A

โœ… Dilutive when average market price > exercise price ๐Ÿ“ˆ
(Options โ€œin-the-money,โ€ likely to be exercised)

โœ… Not Dilutive if exercise price โ‰ฅ average market price ๐Ÿ“‰
(Options โ€œout-of-the-money,โ€ unlikely to be exercised)

Important:

โœ… Stock options included in diluted EPS even if employees canโ€™t immediately sell shares. ๐Ÿ”’๐Ÿ“…

24
Q

How is income tax expense calculated for interim (quarterly) reporting?

A

1๏ธโƒฃ Calculate cumulative income (all quarters so far). ๐Ÿ“…
2๏ธโƒฃ Apply the estimated annual effective tax rate to cumulative income. ๐Ÿ“Š
3๏ธโƒฃ Subtract tax expenses recognized in prior quarters to find the current quarterโ€™s tax expense. ๐Ÿ”„

Formula:
๐ŸŒŸ (Cumulative income ร— Annual effective tax rate) โ€“ Tax expense from previous quarters = Current quarter tax expense ๐ŸŒŸ

25
What are common events that trigger an 8-K filing?
1๏ธโƒฃ ๐Ÿ”„ Change in certifying accountant/auditor 2๏ธโƒฃ ๐Ÿ“‘ Entering into material agreements (e.g., mergers, major contracts, asset sales, sales of securities) 3๏ธโƒฃ ๐Ÿ’ณ Entering into or defaulting on debt agreements or other financial obligations 4๏ธโƒฃ ๐Ÿข Changes in executive officers or board of directors 5๏ธโƒฃ ๐Ÿ“‰ Significant impairment losses or material write-offs 6๏ธโƒฃ ๐Ÿšจ Major business disruptions (e.g., bankruptcies, restructuring) 7๏ธโƒฃ ๐Ÿ“… Changes in fiscal year-end or amendments to financial statements 8๏ธโƒฃ โš–๏ธ Material litigation or regulatory actions โœ… Form 8-K filings provide investors with timely disclosure of material events.
26
๐Ÿ•’ What are the filing deadlines for a Large Accelerated Filer?
โœ… 10-Q: Within 40 days of quarter- end โœ… 10-K: 60 days โœ… Criteria: More than $700M
27
Does Smaller Reporting Company (SRC) status impact SEC filing deadlines (10-K, 10-Q)?
โŒ NO โ€“ SRC status only reduces required disclosures (simpler filings). โฐ Filing deadlines are based solely on Public Float and filer categories (Large Accelerated, Accelerated, Non-Accelerated). SRC Qualification (Disclosure Only): โœ…Public float < $250M, or โœ…Revenue < $100M and float < $700M
28
What are the main benefits of being a Smaller Reporting Company (SRC)?
โœ…Reduced financial disclosures (fewer historical periods required) ๐Ÿ“‘ โœ…Simplified MD&A requirements ๐Ÿ“ โœ…Reduced executive compensation disclosures ๐Ÿ’ผ โœ…Scaled-down narrative disclosures ๐Ÿ“‰ ๐Ÿšฉ NO impact on SEC filing deadlines! โฐ
29
๐Ÿ“† Which equity events are treated as if they occurred at the beginning of the year in EPS calculations?
โœ… Stock dividends and stock splits must be applied retroactively to the start of the year ๐Ÿ“Š They adjust the number of shares outstanding without new capital ๐Ÿšซ Other events like issuing stock, treasury stock purchases, or conversions are weighted from the actual date