FAR 2.1

Question 1

Notes to the F/S’s

Note A or B is usually the…, and includes…

Answer 1

Summary of Significant Accounting Policies - these usually do not include numbers, and should disclose policies

Question 2

Mgmt is required to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern for…

Answer 2

A reasonable period of time not to exceed one year beyond the date the financial statements are issued

Question 3

Major difference b/t US GAAP and IFRS relating to Going Concern and the liquidation basis of accounting…

Answer 3

IFRS does not offer guidance on this basis of accounting

GAAP does provide specific guidance about preparing financial statements when liquidation is imminent

Question 4

Subsequent evaluation period and disclosures for

SEC filers and non-SEC filers

Answer 4

SEC filers responsible for events up to issuance date, but not required to disclose the actual date

Non-SEC filers responsible for events up until GAAP approvals have been made, and also REQUIRED to disclose the actual date of responsibility

Question 5

Fair value measurement

Measurement for Held-to-maturity assets, and what is the Level Input?

Answer 5

Amortized cost

Level input is N/A

Question 6

FV measurement

How to measure foreign currency exchanges, and what Level Input?

Answer 6

Fair Value Method, and Level 2 if based on observable inputs

Question 7

FV Measurement: When there is no active market, how do you find the fair value of an asset when given the quoted price, and transaction cost?

How is the “principal” market determined?

Answer 7

Determine the most advantageous price by netting the fair value and transaction. The fair value is then JUST the quoted price, NOT including the transaction cost.

“Principal” market is the market with the greatest volume of activity

Question 8

A change from the cost approach to the market approach is a change in… and considered what type of accounting change?

Answer 8

change in valuation technique, and is a change in accounting estimate

Question 9

Segment reporting

What are the requirements?

Answer 9

10% of Revenue (internal/external, all operating segments), Profits, Assets
&
75% of total EXTERNAL (consolidated) REVENUE being reported

Question 10

Segment reporting

How to report Profits and Losses

Answer 10

Need to use the absolute amounts of the GREATER of;

1) The combined reported profits of all operating segments that DID NOT report a loss
2) The combined reported loss of all operating segments that DID report a loss

Question 11

SEC Reporting:
10K
10Q
11K
8K
Forms 3,4,5
20F
40F
6K

Answer 11

10K - annual F/S - audited
10Q - quarterly F/S - reviewed
11K - pension plans
8K - major corporate events
Forms 3,4,5 - stock ownership transactions
20F annual report of non-US registrant - audited
40F - annually by Canadian companies - audited
6K - semiannually by foreign private issuers - unaudited

Question 12

10k for accelerated filers - size and days (annual and quarter)

10k for large accelerated filers - size and days

Answer 12

75 million and 75 days annual, 45 days quarter

700 million and 60 days annual, 40 days quarter

Question 13

which F/S for OCBOA method is NOT required?

Answer 13

statement of cash flows

Question 14

Approach for converting cash-basis to accrual-basis

Answer 14

Add increases in current assets
Subtract decreases in current assets

Add decreases in current liabilities
Subtract increases in current liabilities

Question 15

Acid-test (quick ratio)

Answer 15

current liabilities

Question 16

AR Turnover ratio

Answer 16

net credit sales / avg net receivables

Question 17

Inv turnover ratio

Answer 17

COGS / avg inventory

Question 18

Operating cycle

Answer 18

AR turnover in days + inventory turnover

Question 19

cash conversion cycle

Answer 19

AR turnover days + inv turnover days - A/P turnover days

Question 20

accounts payable turnover

Answer 20

COGS / a/p

Question 21

return on common equity

Answer 21

net income - preferred divs / avg common equity

Question 22

times interest earned

Answer 22

EBIT / Interest exp

Question 23

Partnerships: Exact Method

Answer 23

The incoming partners capital account is their actual contribution (you must calculate)

No adj to existing partners capital req’d

Question 24

Partnerships: Bonus Method

Answer 24

BALANCE in total capital accts controls the computation

Incoming partner’s capital account is their percentage of the partnership total NBV (after their contribution)

Then adjust existing partners capital to balance

Question 25

Partnerships: Goodwill method

Answer 25

GOING in investment (dollars) controls the computation

Incoming partners capital acct is their ACTUAL contribution

Question 26

Subsequent events: Loss on a building, how much can you write off in the year of the loss if the cost of replacement will NOT occur until the next year?

Answer 26

Can only w/o the carrying value in the current year.

Question 27

Bonds held to maturity are valued at?

Answer 27

Amortized cost

Note that a fair value given in this type of question could be a distractor.