Financial Statements Flashcards
Income Statement-Single Step
Revenues \+ Other Income = Total Revenues Expenses - COGS - Operating Expenses - Interest Expense = Total Expenses
Total Revenues - Expenses = Net Income
Income Statement-Multi Step
Net Revenue - Costs of Goods Sold = Gross Profit - Operating Expenses = Income from Operations \+ Other Income - Other Expenses \+/- Unusual or Infrequent Events = Income from Continuing Operations - Tax expense = Income from Continuing Operations net of tax \+/- Discontinued Operations net of tax = Net Income
Income Statement-General & Administrative Expenses
Are expenses necessary to maintain daily operations
- Rent
- Utilities
- Insurance
- Executives wages and benefits
- The depreciation on office fixtures and equipment
- Legal counsel and accounting staff salaries
- Office supplies
Income Statement-Selling Expenses
Literally anything to do with sales like salaries, commissions, advertising, freight out, etc.
What’s included in Comprehensive Income
- Unrealized Gains & Losses from Available for Sale Securities
- Certain Gains & Losses from Pension Costs
- Foreign Currency Translation Adjustments
- Unrealized Losses from certain Derivative Transactions
Working Capital Definition
Current assets minus Current liabilities
Random things added back to Indirect Cash flows
Amortization of Premium on Bond Investment
Amortization of Discount on Bond Payable
Random things deducted to Indirect Cash flows
Amortization of Discount on Bond Investment
Amortization of Premium on Bond Payable
Concentration of Credit Risk
When most of company’s customers & suppliers operate in the same industry
Sources of Risk & Uncertainty
- Nature of Operations
- Use of Estimates
- Certain Significant Estimates like loss contingencies
- Vulnerability to significant concentrations of operations
Significant Concentrations
- Concentrations in the volume of business
- Concentrations of revenue
- Concentrations in specific sources
- Concentrations in market or geographical area of operations
Issuance & Legal Fees in a consolidation
- Costs to register & issue stock to buy another company are netted against APIC
- Legal & consulting fees for consolidation are just expensed
Disposal Activities & Gains
Gains are not recognized until the asset is actually sold
Disposal Activities & Expected Losses
If a firm decides to sell a segment next year or whenever it “expects” to sell then you recognize a loss in year 1 for the difference in “Expected” selling price and carrying value
Consolidation Equity Method Journal Entries
Parent’s share of Income/Loss
Dr: Investment in Sub
Cr: Income from Equity Investment
Parent’s share of dividends declared
Dr: Dividends Receivable/Cash
Cr: Investment in Sub
Amortization of difference between FV & BV of Assets
Dr: Income from equity investment
Cr: Investment in Sub
Consolidation Inventory Table
———-Should Be—–Parent—–Sub—–Elimination
Sales
COGS
Inv.
Consolidation Asset Table
----------Should Be-----What Is-----Difference Equip Accum Dep Deprecation Gain or R/E
“Combined” Financial Statements Stockholders equity
You add the stockholder’s equity from all companies minus intercompany shit like if one company paid money for a share of the other company; that is deducted
What constitutes are Variable Interest Entity Beneficiary
- Direct of indirect ability to make decisions about the entity through voting or other rights
- Have to absorb it’s losses
- Right to receive returns from entity if they occur
All most be true to be primary beneficiary
SEC Divisions
- Corporate Finance: oversees compliance
- Enforcement: Investigates violations
- Trading & Markets: Oversees secondary markets
- Investment Management: Oversees investment advisors & companies
- Division of Economic & Risk Analysis: Integrates financial economics & data analytics
SEC Pronouncements
- Financial Reporting Releases: highest authoritative source for public companies
- Staff Accounting Bulletins: SEC’s position on current issues
- Accounting & Auditing Enforcement Releases: reports enforcement actions
Regulations S-X and S-K
S-X governs content of financial statements & S-K governs content of nonfinancial statements
Dividends Subtracted in computing EPS
- Annual dividend commitment on cumulative preferred whether declared or not
- Declared dividends on noncumulative preferred whether paid or not
Dividend in Arrears never included because they were used last year
Segment Reporting Note
Needs to be 10% of combined revenue, including intersegment revenue
External Customers is 75%
