FAR - Financial Statements Flashcards
What are required disclosures?
Nature of operations, use of estimates in prep of FS, and current vulnerability due to concentrations are required disclosures
During inflation, when is a purchasing power gain reported on which type of account non/monetary asset/liability?
Monetary liability has purchasing power gain as money is worth less than what was borrowed.
Nonmonetary does not have a fixed dollar value.
When is gain and loss reported?
A material event/transaction that is unusual in nature OR infrequent in occurrence (BUT not both) that has a gain or loss is presented in a separate component of income from continuing operations.
What are the SEC forms - 10-Q, 8-K, 10-K, S-1
10-Q - quarterly report not required to be audited
8-K info report filed any time during year, includes disclosure of material events
10-K annual report with SEC audited
S-1 initial registration form for securities
What does not need to be disclosed as a related party transaction?
Compensation agreements, expense allowances, and similar items in the ordinary course of business
Transactions which are eliminated in the prep of consolidated or combined FS
These do not need to be disclosed.
What does ASC Topic 825 for fair value option election apply to
Applies to firm commitments that involve financial instruments, warranties that can be settles by paying a third party, held to maturity investments.
It does not apply to leases.
Where is accumulated OCI reported?
Reported in SE section of BS, NOT as contra asset account
Howdo IFRS and US GAAP allow reporting comprehensive income?
IFRS allows one comprehensive income statement or an IS and a comp IS.
US GAAP allows the two above and also in the statement of owners equity
What are different methods under approaches for determining fair value measurements?
Use relevant info from recent transactions - market approach
Using PV techniques to discount cash flows - income approach
Use current replacement cost adjusted for obsolescence - cost approach
Note cannot use undiscounted cash flows as it ignores time value of money
How do errors, accounting changes in estimates affect the opening balance of RE?
An error such as (oversights, misuse of facts, failure to provide for uncollectible accounts in the previous period) of a prior period discovered after issuance should be reported as a prior period adjustment to the opening balance of RE.
A change in accounting estimate (useful life or accounting depreciation method) would be included in net income for the period of change and future periods.
Results of disposal of a discontinued segment is presented in current year after income from continuing ops.
What has to be included in a company’s summary of significant accounting policies in the notes to the FS?
Revenue rec policy, depreciation method/methods of amortizing intangibles, basis of consolidation, basis of profit recognition on long term construction contracts, inventory pricing (NOT inv composition or plant assets composition, NOT deprec exp)
ASC235 - this disclosure should not duplicate details elsewhere in the FS
Requires description of all SIGNIFICANT (not every) accounting policies to be included as part of FS and the standard does not list which types of policies need to be disclosed.
What is classified as non/monetary?
Nonmonetary includes assets and liabilities whose amounts may change over time in terms of money.
Ex: inventory, PPE, obligations under warranty incl accumulated deprec
Monetary includes advances (claim to receive a fixed money amount), allowance for doubtful accounts (AR is money), and unamortized premium on bonds payable (AP is money)
What is included in Total Revenue of the following - sales, purchase discounts, recovery of accounts written off
Total revenue = sales less sales returns and allowances, sales discounts, and estimated allowance for returns.
Purchase discounts is a contra purchases account and not used to calculate NI.
ASC 250 - which periods would the cumulative effect of changing to a new accounting principle be included in NI?
Accounted retrospectively to all prior period, unless impracticable to do so
If a segment is discontinued, how are income shown on current and prior year statements for income from continuing operations?
The income/loss for that segment would be added back to operating income and then take after tax amount.
ASC220 - Comprehensive income applies to which type of entities?
Only enterprises that develop a full set of FS which report cash flows, results of operations, and financial position.
Does not apply to entities that do not have items classified as OCI and not for profit orgs.
What is required disclosure of Related party transactions
ASC850 - must disclose nature of relationship involved, a description of transactions, the dollar amounts of the transactions for each of the periods, amounts due from or to related parties as of each BS date, and the terms and manner of settlement.
What are the ways that comprehensive income can be disclosed?
Can be on a combined IS or two IS.
Cannot be on statement of financial position after RE or in statement of stockholders equity.
What does the principal market and the most advantageous market mean?
Principal market - market with greatest volume and level of activity
Most advantageous - maximizes price received for the asset
What is considered General and Admin expenses?
Accounting and legal fees, interest, loss on sale of office equipment, rent for office space (split between sales dept and other)
Accounting and legal fees and the portion of office rent that is not allocable to sales are considered G&A.
Interest is included with financial/other expense.
Loss on sale of office equipment is included in other expenses and losses.
The office rent allocable to sales dept is an operating expense and included in selling expense.
How are available for sale securities shown on NI when value increases and are sold (if FV option is not elected)?
Amount of gain would be recognized full on year of sale.
The unrealized gain for the previous year, market value then less cost is reported as component of OCI in 2010.
Since they are AFS, unrealized G/L prior to sale are not reported in NI, so therefore 0 for gain in prior year.
How are income from operations before income tax, loss from discontinued operation and extraordinary gain shown on the IS?
The loss from discontinued operations and extrordinary gain are shown NET OF TAX as a separate component of income after income from operations.
What is eligible for the FV election (ASC825) and can it be revoked
The FV option may be elected on an instrument by instrument basis for Available for sale securities
FV option can be applied to insurance contracts that can be settled be a third party
FV option must be applied to all interests in the same entity.
Once elected, it cannot be revoked.
Excludes pension liabilities, leases, and share based payments
Where are unrealized gains and losses reported
Reported in earning for the period, not OCI
