FAR JY 1/21/16

Question 1

what should be included a company’s summary of significant accounting policies?

Answer 1

The summary of significant accounting policies footnote describes the important accounting choices made by the firm for financial reporting purposes. Such policies affect recognition, measurement, and disclosure.

For example, in some areas of revenue recognition, GAAP allows a choice from among several methods of recognition and measurement. This footnote discloses the choices made by the firm to help users understand the reported amounts of revenue and affected accounts in the Income Statement and Balance Sheet.

Different methods produce different reported amounts.

Question 2

The summary of significant accounting policies should disclose the basis of profit recognition on long-term construction contracts. why?

Answer 2

The summary of significant accounting policies conveys information regarding the important accounting methods and policies chosen by the firm, when a choice is available.
Knowledge of the methods is critical to an understanding of the amounts disclosed in the financial statements. The method of accounting for long-term contracts may be the percentage of completion or completed contract method. Disclosure of this method assists the user in understanding the meaning of reported revenue and gross profit.

Question 3

how many years should a company disclose the unconditional purchase for each of

Answer 3

5years