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

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

Answer 7

Aren’t prorated

Fully recognized in Interim Period as incurred

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

Question 8

How are cumulative gains and losses reported in Interim Financials?

Answer 8

Reported as if they occurred in the first quarter

Question 9

How is inventory valuation handled in Interim Financials?

Answer 9

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 10

What is one of the primary problems with interim reporting?

Answer 10

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

Question 11

For whom is Segment Reporting required?

Answer 11

Publicly traded companies

Question 12

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

Answer 12

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 13

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

Answer 13

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