FAR - Reporting

Question 1

Interim - how are discontinued ops and extraordinary reported? What about temporary and permanent writedowns?

Answer 1

If occurred during the year, it is included In NI and disclosed in notes to interim FS
Extraordinary items are disclosed separately and included in the determination of NI for the interim periods in which they occur ONLY.
Permanent writedowns or permanent inventory losses from market declines are recognized in full when incurred. If temporary, it does not need to be recognized in interim.

Question 2

IFRS and US GAAP - mandates on interim reporting

Answer 2

US GAAP - has minimum guidelines for interim

IFRS does not mandate interim

Question 3

How are expenses and those that are unanticipated included in one quarter’s interim FS?

Answer 3

270 - Expenditures (including unanticipated and major ones, even includes estimates for executive bonuses for the year) that clearly benefit more than one interim period may be allocated among the periods benefited.

Question 4

What is the most serious problem for interim

Answer 4

Dealing with costs that are expensed in one interim period but may provide benefits to other interim periods.

Question 5

How much tax expense is reported if given effective income tax rate, prior year rate, expected annual income tax rate, and statutory tax rate?

Answer 5

Use the expected effective annual income tax rate for the current year.

Question 6

What is reflected in the effective tax rate expected to be applicable for the full fiscal year

Answer 6

Reflects foreign tax rates and capital gains

Question 7

When can you determine COGS using estimated GP rates?

Answer 7

It is only for interim reporting and not for year end external reporting. For year end, the actual COGS must be determined by using the inventory flow method.

Question 8

General rule for interim

Answer 8

Interim should be prepared using the same principles as used in the annual FS
Revenue and exp should be allocated to period which they occur
Seasonal rev should not be deferred

Question 9

What happens when there is a inventory loss that is expected to be permanent in the first quarter which is exceeded by a recovery in the 3rd quarter

Answer 9

The first quarter shows the decline and 3rd quarter shows the increase in the same amount of the decline.
A subsequent recovery is a cost recovery but never recognized above original cost.

Question 10

What does the enterprise have to disclose about each reportable segment if the specified amounts are reviewed by the chief operating decision maker?

Answer 10

1. Revenues from external customers
2. intersegment revenues
3. interest revenue and expense (reported separately unless it is majority of revenue)
4. deprec, depletion, and amort expense
5. unusual and extraordinary items
6. equity in the NI of investees accounted for by equity method
7. income tax expense/benefit
8. significant noncash items
   COGS is NOT a required disclosure.

Question 11

When does a company have to disclose major customer data?

Answer 11

If 10% or more of the revenue of an enterprise is derived from sales to any single customer, that fact and amount of revenue from each significant customer shall be disclosed. The segment generating the sales must be disclosed by the name of the customer does not need to be disclosed.

Question 12

When can you aggregate two or more operating segments into one?

Answer 12

If all of the aggregation criteria are met, OR if after performing the 10% test a majority of the aggregation criteria are met.

Question 13

To determine if an industry segment is a reportable segment, what is considered?

Answer 13

Sales to unaffiliated customers to determine if 75% of unaffiliated revenues have been reported by segments
Intersegment sales are included in segment revenue to determine if segment revenue is 10% or more of the combined segment revenues.

Question 14

Who is the chief operating decision maker?

Answer 14

280 - does not require disclosures about the term. This term identifies a function, not necessarily a manager with a specific title.

Question 15

Which type of entity must report on business segments?

Answer 15

Segment reporting is required of publicly traded enterprises.

Question 16

IFRS - the approach used in segment reporting is known as

Answer 16

Management approach- segments are organized by the way mgmt organizes segments internally to make operating decisions and assess performance.

Question 17

What are required disclosures regarding external customers for publicly traded enterprises reporting segment info?

Answer 17

Disclosure is required of the fact that the company receives 10% or more of its total enterprise revenue from a single customer. The identity is not required.

Question 18

What are the 10% tests?

Answer 18

This determines if a division is significant to be a reportable segment. It must meet one of the three 10% tests.
1. revenue is 10% or more of the combined segment revenue (including intersegment rev)
2. the absolute value of the segment’s operating profit/loss is 10% or more of the greater of the absolute 2) combined reported profit of all segments not reporting a loss or b) combined reported loss of all segments reporting a loss
3. Identifiable assets are 10% or more of the combined assets of all segments
Note Liabilities are not considered in determining reportable segments.

Question 19

What is the required disclosure for each reportable operating segment?

Answer 19

280 - info about reported segment profit or loss, segment assets, and the basis of measurement should be disclosed. Profit or loss and total assets must be disclosed for each reportable operating segment.

Question 20

What does profit or loss include?

Answer 20

Includes intersegment profits
The enterprise should report profit or loss based on the measure reported to the chief operating decision maker for purposes of making decisions

Question 21

What is required enterprise wide disclosures? What type of enterprises does it apply to?

Answer 21

280 - products and services, geographic areas, and major customers are required for all public business enterprises including those with only one segment.
Does not apply to not for profit and non public.

Question 22

How many segments are reported and how is it determined? For example, total revenues is 80M and sales to external customers portion is 30M, what value must the external revenue be at least..

Answer 22

There must be enough segments reported so that at least 75% of unaffiliated revenues is shown by reportable segments (75% test).
Since sales to external customers total 30M, it must be at least 75% which is 22.5M.

Question 23

What qualifies as an operating segment? Who does management have to report to? What if results are reported to manager of European division?

Answer 23

If it reports to the COO and it meets the 10% test, it qualifies.
Corporate hq is not a segment that engages in business activities.
If it reports directly to the manager of the European division, it is not evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.