FAR Module 20B

Question 0

What is the primary purpose of interim reporting (2)

Answer 0

1) To provide information which is more timely than is available in annual reports.
2) Also to highlight business turning points which could be buried in annual reports

Question 1

This term is used to describe financial reporting for periods of less than one year, generally quarterly financial statements

Answer 1

Interim reporting

Question 2

What is the discrete view

Answer 2

Each interim period is a separate accounting period. Interim periods must stand on their own: same principles and procedures as for annual reports and no special accruals or deferrals

Question 3

What is the integral view

Answer 3

Each interim period is an integral part of an annual period; expectations for annual periods must be reflected in interim reports; special accruals, deferrals, and allocations are utilized

Question 4

Describe the general rule and any exceptions for revenues in the interim reporting

Answer 4

The general rule is the same as annual reports - there are no exceptions

Question 5

Describe the general rule and any exceptions for COGS in the interim reporting

Answer 5

General rule is that cost of goods sold is the same as annual reports.

Exceptions:

1) gross profit method may be used to estimate cost of good sold and ending inventory for each interim period
2) Temporary declines in inventory market value need not be recognized

Question 6

Describe the general rule and any exceptions for costs and expenses (unrelated to COGS) in the interim reporting

Answer 6

The general rule is the same basis as annual reports.

The exception is that expenditures which clearly benefit more than one interim period may be allocated among periods benefited

Question 7

Describe the general rule and any exceptions for taxes in the interim reporting

Answer 7

General Rule:

(Year-to-date income * estimated annual effective tax rate) - (expense recognized in previous quarters)

No exceptions

Question 8

Describe the general rule and any exceptions for discontinued operations in the interim reporting

Answer 8

General rule is that these are recognized the interim period as incurred. This means no prorating. There are no exceptions

Question 9

Describe the general rule and any exceptions for extraordinary items in the interim reporting

Answer 9

The general rule is that these are recognized in the interim period as incurred. This means no prorating. Materiality is evaluated based on expected end year results. There are no exceptions

Question 10

Describe the general rule and any exceptions for changes in accounting principle in the interim reporting

Answer 10

The general rule is that this should be applied retrospectively. (The cumulative effect of change reflected in the carrying amount of assets and liabilities as of the first period presented with offsetting adjustments to retained earnings for that period.) Financial statements are adjusted for period-specific effects of the change.

There are no exceptions

Question 11

T/F

A key disclosure item for interim reporting is the seasonal nature of the firm’s operations. This disclosure helps prevent misleading inferences and predictions about annual results

Answer 11

TRUE

Question 12

T/F

IFRS mandates interim reporting

Answer 12

FALSE

however, when interim reports are required, four financial statements are required: the statement of financial position, a statement of comprehensive income, statement of changes in equity, statement of cash flows

Question 13

T/F

an entity does not need to use the same accounting policies for interim financial statements as for year end

Answer 13

FALSE

to be consistent they need to use the same accounting policies