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FAR 2014 > Financial Statements > Flashcards

Financial Statements Flashcards

1
Q

Which Personal Financial Statements are required?

A

Statement of Financial Condition & Statement of Changes in Net Worth

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2
Q

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

A

Estimated current value

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3
Q

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?

A

Presented on Statement of Financial Condition between Liabilities and Net Worth

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4
Q

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

A

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

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5
Q

How is life insurance presented on a Personal Financial Statement?

A

Only shown if there is cash surrender value

It is shown net of loans against the policy

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6
Q

How are business interests shown on a Personal Financial Statement?

A

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

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7
Q

What is the discreet view in an Interim Financial Statement?

A

Interim period is a separate accounting period - not GAAP

Same accounting principles used for annual reporting should be used.

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8
Q

What is the integral view in an Interim Financial Statement?

A

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

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9
Q

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

A

Aren’t prorated

Fully recognized in Interim Period as incurred

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

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10
Q

How are cumulative gains and losses reported in Interim Financials?

A

Reported as if they occurred in the first quarter

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11
Q

How is inventory valuation handled in Interim Financials?

A

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

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12
Q

What is one of the primary problems with interim reporting?

A

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

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13
Q

For whom is Segment Reporting required?

A

Publicly traded companies

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14
Q

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

A

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

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15
Q

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

A

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

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16
Q

How to report gain or loss from single occurrence not directly related to operation of pension plan

A

Report as part of that occurrence and not part of plans activity

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17
Q

What is the corridor approach

A

Determines gain or loss amortization on unrecognized net loss
Recognized gain or loss is excess of 10% of greater of PBO or MRAV over unrecognized net loss
Value / average remaining service period is amortization

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18
Q

Number of years required to disclose estimated future contributions to defined benefit plan

A

Following year only

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19
Q

What is prior service cost? How is it recognized?

A

PV of retroactive benefits given to employees for years of service provided before date of amendment to plan
Recognize as expense (amortized) during service periods of those employees who are expected to receive benefits under plan

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20
Q

What is pension interest cost?

A

Increase in FV of plan assets due to passage of time

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21
Q

How does plan amendment for prior service cost affect current and past financial statement

A

Change reflected on current and future statements

No retroactive change

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22
Q

What is unfunded accrued pension cost?

A

A liability recognized when the net periodic pension cost exceeds amount the employer has contributed to the plan

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23
Q

Calculate PBO

A

Beg PBO + service cost + interest - benefits paid

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24
Q

What is used as the Defined benefit plan discount rate

A

Settlement rate

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25
Q

Treatment of multiple defined benefit plans

A

Aggregate all overfunded plans as no current asset ; aggregate all underfunded plans as noncurrent liability

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26
Q

Journal entry to record underfunded plan

A

DR OCI

CR pension liability

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27
Q

What is included in special termination benefits

A

Lump sum payments and PV of future payments

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28
Q

What is included in the PBO reconciliation

A 
Service cost
Benefits paid
Interest cost
Contribution by plan participants
Actuarial G/L 
Plan amendments
Divestiture and settlements
Special termination benefits
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29
Q

Disclosure of health care costs for pension

A

Must disclose the effect of 1% increase or decrease in health care costs

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30
Q

Calculate expected future service method

A

Group employees according to time remaining to retirement. Multiply the number in each group by the period to retirement. Divide into # of employee service years

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31
Q

Disclosure for increase in health car cost for

A

Both aggregate of service and interest components and accumulated post retirement pension obligation

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32
Q

Calculation of net periodic post retirement benefit cost excludes

A

Benefit payments

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33
Q

What is attribution period for post retirement health care benefit

A

Hire date through date of full eligibility

34
Q

What is a transition obligation

A

Difference between accumulated benefit obligation and FV of plan assets at beginning of year

35
Q

When can transition obligation be recognized

A

Recognize immediately or amortized over straight one basis over max of 20 years ( or 20 years if elected)

36
Q

What method does IFRS use defined benefit plans

A

Projected unit cost method

37
Q

When can pensions be netted user IFRS?

A

Only of there is a legally enforceable right to use plan assets of one plan to settle obligations of another

38
Q

When to report a segment

A

If segment meets one of the 10 percent tests, 10% of
Revenues
Operating profit
Assets

39
Q

What is included in segment revenue

A

Sales of unaffiliated customers
Intersegment sales
Not interest on loans to other segments

40
Q

When to report customer

A

Sales to customer greater than 10% of enterprise revenue

41
Q

How many segments are needed

A

Segments must be at least 75% of unaffiliated revenues

42
Q

What enterprise wide disclosures are required

A

Products
Services
Geographic areas
Major customers

43
Q

Who is required to provide enterprise wide disclosures

A

All public enterprises including those with a single reportable segment

44
Q

Examples of segment disclosures

A 
External revenue
Intrasegment revenue
Interest rev and expense
Depreciation
Unusual or extraordinary items
Equity in net income of investees accounted for using equity method
Significant noncash items
45
Q

When may two segments be aggregated

A

If all aggregation years are met
Or
If after performing the 10% test a majority of aggregation criteria are met

46
Q

What is the management approach

A

Method chosen for determining what information to report

47
Q

How is the segment profit as loss shown

A

Shown as would be internally, including criteria from the Chief Decision maker

48
Q

Rules for IFRS segment reporting

A

Management approach used to identify segments

Revenue, asset and profit and loss tests used

49
Q

How are extraordinary items reported in interim FS

A

Reported in period incurred, not allocated to several periods

50
Q

How is a change in inventory method or any retrospective change handled I interim FS

A

Restate prior interim statements, change not reported in current interim FS

51
Q

How should cost charged in an annual period (depreciation, bonuses) be treated for interim FS

A

Allocated among interim periods which clearly benefit from the expense through accruals and deferrals

52
Q

How is the tax provision for an interim period calculated

A

Tax for year to date (estimated yearly effective rate x YTD income) less total tax provision reported for prior periods

53
Q

When is deferral of advertising expense allowed in year end reporting

A

Only when advertising has not been run in the media

54
Q

How is planned volume variance expected to be absorbed by year end treated for interim FS

A

Should be deferred for interim periods

55
Q

Treatment of temporary decline in inventory value due to market in interim FS

A

If temporary, not recorded in interim FS

56
Q

Treatment of permanent decline in inventory value, and subsequent increase in value in later period in interim FS

A

Decrease recorded in interim period, increase recorded in future period up to the amount of original decrease

57
Q

Use of estimated GP rates to determine COGS for interim period

A

Allowed for COGS calculation

58
Q

What is considered when finding effective tax rate for interim period

A

Effective tax rate should reflect investment tax credit, foreign tax rates, depletion percentage, capital gain rates, and tax planning alternatives

59
Q

What is the integral view for interim reporting

A

Each interim period is integral part of annual period, same accruals, deferrals, and accounting methods

60
Q

What is the primary purpose of interim reporting? What is sacrificed?

A

Primary purpose is timeliness

Sacrifice reliability

61
Q

IFRS requirements for interim reporting

and statements required

A 
IFRS does not require interim reporting
If presented interim reporting must include 
Statement of financial position
Statement of change in equity
Statement of comprehensive income
Statement of cash flows
62
Q

What is included in comprehensive income

A

All changes in equity except those resulting from investments by owners and distributions by owners

63
Q

What is realization

A

Process of converting noncash resources and rights into many through the sale of assets for cash or claims to cash

64
Q

What is an exception to a rule of accruing revenue at time of sale

A

Agricultural products that are homogeneous and have immediate marketability at quotes prices

65
Q

How are office supplies treated under the accrual method

A

Inventoried, expensed when used

66
Q

How is contingent revenue recognized under the milestone method

A

When milestone achieved contingent revenue in its entirety is recognized

67
Q

When to report the effects of indirect and direct effects of accounting changes

A

Direct - earliest period

Indirect - period of change

68
Q

How is an accounting change recorded if impracticable to determine cumulative effect and period ? If only cumulative effect can be determined?

A

Present change on prospective basis

Change in earliest period which it can be determined

69
Q

How are the costs of exit activities and restructuring charges measured

A

At fair value when incurred

70
Q

What is the principle market

A

Market in which the reporting entity would sell the asset or transfer the liabilities with the greatest volume and level of activity for the asset or liability

71
Q

How should a change in valuation technique used to remeasure FV be recorded

A

As a change in estimate. No disclosure required

72
Q

What items are restated in constant dollar accounting

A

Only Nonmonetary items

73
Q

What is current cost accounting

A

Method of valuing and reporting assets, liabilities, revenue and expense at current cost at the balance sheet date or date of sale

74
Q

Calculate current cost holding gain

A

Current replacement cost - purchase price

75
Q

Calculate current cost depreciation

A

Average current cost - salvage / useful life

76
Q

How are inventory and equipment valued under the current cost method

A

Lower of current cost or recoverable amount

77
Q

Calculate current cost accounting COGS

A

of units sold x avg current cost of units

78
Q

When is the liquidation method of accounting used

A

When liquidation is imminent

79
Q

What are the requirements for financial reports and forecasts

A

Prepared in accordance with GAAP
With the plans of the entity
With due professional care

80
Q

What are the required trust fund FS

A

Statement of assets and liabilities
Statement of operations
Statement of changes in net assets

81
Q

What basis is used for IFRS statement of cash flows

A

Direct or indirect method

FAR 2014 (19 decks)

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