Financial Statements

Question 1

Which Personal Financial Statements are required?

Answer 1

Statement of Financial Condition & Statement of Changes in Net Worth

Question 2

How are assets and liabilities valued in a Personal Financial Statement?

Answer 2

Estimated current value

Question 3

How are estimated taxes that would be paid if all assets were converted into cash and all liabilities paid presented on a Personal Financial Statement?

Answer 3

Presented on Statement of Financial Condition between Liabilities and Net Worth

Question 4

What is the general presentation on a statement of financial condition?

Answer 4

Assets
- Liabilities
- Estimated taxes on assets sold
: Net Worth

Question 5

How is life insurance presented on a Personal Financial Statement?

Answer 5

Only shown if there is cash surrender value

It is shown net of loans against the policy

Question 6

How are business interests shown on a Personal Financial Statement?

Answer 6

Business Interests that constitute a large percentage of total assets should be separated from other investments

Question 7

What is the discreet view in an Interim Financial Statement?

Answer 7

Interim period is a separate accounting period - not GAAP

Same accounting principles used for annual reporting should be used.

Question 8

What is the integral view in an Interim Financial Statement?

Answer 8

Interim period is a part of the annual period - GAAP

Gross profit method may be used to estimate COGS and inventory

Temporary declines in inventory aren’t recognized

Question 9

How are discontinued operations & extraordinary items reported in Interim Financial Statements?

Answer 9

Aren’t prorated

Fully recognized in Interim Period as incurred

If it occurs in Q3 - it’s recognized in Q3

Question 10

How are cumulative gains and losses reported in Interim Financials?

Answer 10

Reported as if they occurred in the first quarter

Question 11

How is inventory valuation handled in Interim Financials?

Answer 11

If inventory experiences a decline in value during an interim period - the loss is recognized in the interim period

If the loss is expected to be only temporary - no loss is recognized

Question 12

What is one of the primary problems with interim reporting?

Answer 12

The matching principle gets messed up - Expenses incurred in one period may benefit future periods

Question 13

For whom is Segment Reporting required?

Answer 13

Publicly traded companies

Question 14

What factors cause a segment to be significant and therefore to be reported separately?

Answer 14

Revenue of segment is 10% or more of total

Profit is 10% or more of total

Segment assets are 10% or more of total

75% Test - All segment revenues must equal 75% of total external revenues

Question 15

What is the disclosure requirement regarding sales of 10% or more for one customer?

Answer 15

If 10% or more of enterprise revenue comes from one customer - the segment making the sales must be disclosed

Question 16

Balance Sheet assesses the company’s

Answer 16

liquidity and financial flexibility

Question 17

Related party disclosures:

Answer 17

Disclose:

sale to affiliated companies
loans to officers
agreement as surety for a loan
non monetary exchanges by affiliates

Question 18

Related party disclosures - EXCLUDE

Answer 18

salaries of officers
officers expenses
transactions eliminated in combined/consolidated FS

Question 19

Principal market

Answer 19

greatest volume and level of activity

Question 20

Most advantageous market

Answer 20

maximizes price received

Question 21

SEC form 8-k

Answer 21

material events

Question 22

Required minimum disclosures in IFRS income statement

Answer 22

income,

finance costs,

share of profits and losses using the equity method,

tax expense,

discontinued operations,

profit or loss,

noncontrolling interests in profits and losses, and the net profit (loss) attributable to equity holders of the parent.

Question 23

Fair value method applies to

Answer 23

The fair value option applies to all financial assets including

available-for-sale,
held-to-maturity,
equity method investments.

The fair value option also applies to certain

financial liabilities,
firm commitments that involve financial instruments,
written loan commitments,
nonfinancial insurance contracts that can be settled by paying a third party,
warranties that can be settled by paying a third party,
host financial instrument that is an embedded nonfinancial derivative instrument separated from a nonfinancial hybrid instrument.

Question 24

Fair value method does not apply to

Answer 24

consolidations, 
pensions, 
share-based payments, 
stock options, 
other postemployment benefits (OPEB), 
exit or disposal activities, 
leases, or 
financial instruments that are a component of equity.

Question 25

Form 10-k

Answer 25

annual audited report