Financial Statements

Question 1

QUESTION

Which Personal Financial Statements are required?

Answer 1

Statement of Financial Condition & Statement of Changes in Net Worth

Question 2

QUESTION

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

Answer 2

Estimated current value

Question 3

QUESTION

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

QUESTION

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

Answer 4

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

Question 5

QUESTION

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

QUESTION

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

QUESTION

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

QUESTION

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

QUESTION

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

QUESTION

How are cumulative gains and losses reported in Interim Financials?

Answer 10

Reported as if they occurred in the first quarter

Question 11

QUESTION

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

QUESTION

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

QUESTION

For whom is Segment Reporting required?

Answer 13

Publicly traded companies

Question 14

QUESTION

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

QUESTION

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