FAR 2 - Other Financial Statement Presentations

Question 1

How do you determine estimated tax liability in personal financial statements?

Answer 1

Difference between fair values and tax bases of assets and liabilities

Question 2

What are included in personal financial statements?

Answer 2

1) Statement of financial condition - balance sheet

2) Statement of changes in net worth (optional)

Question 3

Guidelines for OCBOA presenation?

Answer 3

1) Differentiate the OCBOA financial statements (can’t put statement of financial position because that’s accrual)
2) Explain changes in equity accounts
3) Statement of cash flows is NOT required

Question 4

Presentation of cash basis financial statements?

Answer 4

1) Statement of cash and equity
- Cash is the only asset, no liability, equity = cash

2) Statement of cash receipts and disbursements
1) Revenue received
2) Proceeds from asset sales
3) Expenses paid

Question 5

What are common modifications in Modified Cash Basis financial statements?

Answer 5

1) Capitalizing and depreciating fixed assets
2) Accrual of income taxes
3) Recording liabilities for long-term and short-term borrowings and interest expense
4) Capitalizing inventory
5) Reporting investments at fair value and recognizing unrealized gains and losses.

Question 6

How do you report nontaxable revenues and expenses in Income Tax Basis Financial Statements?

Answer 6

Nontaxable revenues and expenses may be reported as any one of following:

1) Separate line items in the revenue and expense sections of the statement of revenues and expenses
2) Additions and deductions to net income
3) A disclosure in a note

Question 7

How is life insurance reported in personal financial statements?

Answer 7

Life insurance loans payable are netted against the cash surrender value of life insurance

Question 8

How is a business interest that constitutes a large part of an individual’s total assets reported?

Answer 8

A business interest that constitutes a large part of an individual’s total assets should be shown separately from other investments.

Question 9

At what value are vested pension plan benefits reported?

Answer 9

Vested pension plan benefits are reported at fair value

Question 10

In what order are assets and liabilities put in personal financial statements?

Answer 10

In order of liquidity and maturity.