Financial Statements Flashcards
Which Personal Financial Statements are required?
Statement of Financial Condition & Statement of Changes in Net Worth
How are assets and liabilities valued in a Personal Financial Statement?
Estimated current value
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?
Presented on Statement of Financial Condition between Liabilities and Net Worth
What is the general presentation on a statement of financial condition?
Assets
- Liabilities
- Estimated taxes on assets sold
: Net Worth
How is life insurance presented on a Personal Financial Statement?
Only shown if there is cash surrender value
It is shown net of loans against the policy
How are business interests shown on a Personal Financial Statement?
Business Interests that constitute a large percentage of total assets should be separated from other investments
What is the discreet view in an Interim Financial Statement?
Interim period is a separate accounting period - not GAAP
Same accounting principles used for annual reporting should be used.
What is the integral view in an Interim Financial Statement?
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
How are discontinued operations & extraordinary items reported in Interim Financial Statements?
Aren’t prorated
Fully recognized in Interim Period as incurred
If it occurs in Q3 - it’s recognized in Q3
How are cumulative gains and losses reported in Interim Financials?
Reported as if they occurred in the first quarter
How is inventory valuation handled in Interim Financials?
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
What is one of the primary problems with interim reporting?
The matching principle gets messed up - Expenses incurred in one period may benefit future periods
For whom is Segment Reporting required?
Publicly traded companies
What factors cause a segment to be significant and therefore to be reported separately?
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
What is the disclosure requirement regarding sales of 10% or more for one customer?
If 10% or more of enterprise revenue comes from one customer - the segment making the sales must be disclosed
what is the accepted valuation technique for fair value estimates?
the cost approach.
What is the purpose of reporting comprehensive income?
To report a measure of overall enterprise performance.
ASC Topic 255 requires that the current cost for inventories be measured as the
Lower of current cost or recoverable amount.
An extraordinary gain should be reported as a direct increase to which item?
“Net income”. as Nonrecurring items are disclosed separately and included in the calculation of income for the period.
According to ASC Topic 820, the fair value of an asset should be based upon
The price that would be received to” SELL” the asset.
Users of prospective financial information can include…
I. General users with whom the responsible party is not negotiating directly.
II. The responsible party.
III. Third parties with whom the responsible party is negotiating directly.
what are the Reasons for preparing Prospective F/S?
- To aid in considering a change in accounting or operations.
- To aid in preparation of the budget.
- To obtain external financing.
According to ASC Topic 820, what is the assumption used in fair value measurements of nonfinancial assets?
The asset is in its highest and best use.
Where on the statement of financial position (balance sheet) should accumulated other comprehensive income be reported?
As a separate item under stockholders’ equity.
Accumulated other comprehensive income includes unrealized amounts while retained earnings contains largely realized amounts.
