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FAR > Financial Statements > Flashcards

Financial Statements Flashcards

1
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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2
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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3
Q

Subsequent Event

A

Occur after the balance sheet date but before the reporting date

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4
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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5
Q

Two Types of Subsequent Events

A
  1. Recognized - The condition existed as of the balance sheet date and therefore should be included in the FS
  2. Unrecognized - The condition did not exist as of the BS date and should possible be included in the footnotes based on the materiality
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6
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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7
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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8
Q

For whom is segment reporting required?

A

Publicly traded companies

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9
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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10
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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11
Q

Accumulated Other Comprehensive Income

A

SHE Account

Shown in Statement of SHE & on the BS after RE

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12
Q

Comprehensive Income is made up of what?

A

Net Income + OCI

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13
Q

Other Comprehensive Income

A

Temporary SHE Account
Closes to Accumulated OCI
Includes Unrealized gains on Non-Trading Securities & Foreign Currency Translations Adjustment

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14
Q

OCI can be reported what two ways?

A
  1. Bottom of IS right after NI

2. Separate statement that starts with NI

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15
Q

Two Methods to show Comprehensive Income Net of Tax

A
  1. Show each line Net of Tax

2. Show each Line Gross and then have a total line with tax liability

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16
Q

What are Stock Warrants?

A

Additional paid in capital
A SHE account
NOT part of OCI

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17
Q

What relationships require Related Party Disclosures (ASC 850)

A
  1. Affiliate
  2. Control
  3. Immediate Family
  4. Management
  5. Principal Owner (> 10%)
  6. Related Parties
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18
Q

What related party material transactions do the footnotes not have to disclose?

A
  1. Transactions in the normal course of business

2. Transactions eliminated from the FS

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19
Q

What type of relationship must be disclosed regardless of any present transactions?

A

A control relationship

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20
Q

Reporting includes what?

A

Both Recognition & Disclosures

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21
Q

Recognition is?

A

Description + Amount on FS

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22
Q

What must be disclosed even if there is just a remote risk?

A

Guarantees of Indebtedness of Others

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23
Q

Fair Value Measurement (ASC 820) is?

A

A price that would be received to sell an asset or transfer a liability
Focus on Exit Price

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24
Q

What are the steps to applying Fair Value?

A
  1. Identify object being measured
  2. Determine most advantageous market
  3. Determine Valuation Premise (In Use or In Exchange)
  4. Determine Valuation Technique (Market, Cost, or Income)
25
Q

Valuation Premise Types

A
  1. In-Use - Using with another asset

2. In-Exchange - Using asset by itself

26
Q

Valuation Technique Types

A
  1. Market - Level 1 - Uses identical or comparable market transactions
  2. Cost - Level 2 - Uses comparable items for current or replacement cost
  3. Income - Level 3 - Present value of future cash flows; unobservable inputs
27
Q

Fair Value Option for Financial Assets & Liabilities (ASC 825) applies to:

A
  1. Available for Sale, held to maturity, & equity method investments
  2. Certain financial liabs, firm commitments that involve fin. instruments, nonfinancial insurance contracts & warranties that can be settled by paying a third party, and host financial instruments
  3. Long Term Notes Payable
28
Q

Fair Value Option for Financial Assets & Liabilities (ASC 825) does not apply to:

A

Consolidations, pensions, stock options, Other Post Employment Benefits (OPEB), exit or disposal activities, leases, or financial instruments that are a component of equity

29
Q

Fair Value Option (ASC 825) Election:

A
  1. Must elect on specific items
  2. If applied to an instrument under the equity method, all instruments under that entity must use the FVO
  3. Can not elect to only part of an instrument
  4. Once elected is irrevocable
30
Q

FVO Unrealized G/Ls are reported where?

A

Earnings - under other methods, these are shown in OCI

31
Q

FVO (ASC 825) Election Date Rules:

A
  1. The date an item is first eligible (bought)
  2. The date an entity enters into a firm contract
  3. Percentage of ownership change and can no longer consolidate (drop below 50%)
  4. Move from below 20% to between 20-50%
32
Q

FVO (ASC 825) Disclosure can be done two ways:

A
  1. Sum of FVO on one line (must be parenthetically disclosed)
  2. Broken out by FVO and NFVO lines
  3. Note - Must disclose Equity Method for eligible assets even if the FVO is elected
33
Q

FVO must have disclosure notes where?

A

Balance sheet and Income Statement

34
Q

What are Other Comprehensive Bases of Accounting (OCBOA)?

A

Prepared financial statements in format other than GAAP

35
Q

Four methods under OCBOA?

A
  1. Cash Basis - Revenue is recognized when cash is received and expenses recognized when paid
  2. Modified Cash Basis - Similar to GAAP, but should not be illogical
  3. Tax Basis - Prepared on tax laws and regs; must still include items that are non-taxable
  4. Regulatory Basis - prepared based on regs by a specific agency
36
Q

OCBOA prepared statements should not use what terminology?

A

Balance Sheet or Income Statment

37
Q

What should the notes for an OCBOA prepared statement disclose?

A

Differences between prepared and GAAP

38
Q

Companies must register with SEC if they meet what 3 criteria?

A
  1. Assets of more than $10m
  2. 500 or more shareholders
  3. Securities that trade on a NSE or over the counter market
39
Q

SEC Registered companies must file what forms?

A
  1. Form S-1 - Registration
  2. Form 8k - Information regarding material events
  3. Form 10k - Annual Report
  4. Form 10q - Quarterly Report
  5. Schedule 14A - Proxy Statement
40
Q

What are the 3 types of Filers?

A
  1. Large Accelerated
  2. Accelerated
  3. Non Accelerated
41
Q

Large Accelerated?

A
  1. Share Outstanding > $700m
  2. 10k - 60 days
  3. 10q - 40 days
42
Q

Accelerated?

A
  1. Shares Outstanding > $75m
  2. 10k - 75 days
  3. 10q - 40 days
43
Q

Non Accelerated?

A
  1. Share Outstanding < $75m
  2. 10k - 90 days
  3. 10q - 45 days
44
Q

What is SEC Reg S-X?

A

Describes the form & content of FS filed with the SEC

45
Q

What is SEC Reg S-K?

A

Describes the requirements for information and forms by Reg S-X

46
Q

What is SEC Reg AB?

A

Describes reporting requirements for asset backed securities

47
Q

What is SEC Reg FD?

A

Mandates publicly traded companies disclose material information to all inventory simultaneously

48
Q

IFRS Differences

A
  1. No extraordinary items
  2. Operating expense can be recognized by nature or function
  3. Each item in Comprehensive Income should be stated on a separate line on the statement of CI
  4. Interest Paid is either operating or financing
  5. Cash from sale of trading activities is classified as operating
  6. Uses “Income” not “revenue”
49
Q

Fair Value Hierarchy is broken down how?

A

Level 1
Level 2
Level 3

50
Q

Net Sales Calculation

A

Gross Sales
- Sales Discounts
-Sales Returns & Allowances
= Net Sales

51
Q

COGS Calculation on Periodic System

A 
Beginning Inventory
\+COG Purchased
=Cost of Goods Available for Sale
-Ending Inventory
=COGS
52
Q

COG Purchased Calculation

A 
Gross Purchases
-Purchase Discounts
-Purchase Returns & Allowances
=Net Purchases
\+Freight/Transportation
=COG Purchased
53
Q

Accounting Errors or Change in Accounting Principle causes restatement?

A

Accounting Errors

54
Q

GAAP Inventory Valuation Methods?

A
  1. LIFO
  2. FIFO
  3. Weighted Average
55
Q

The effect of a material transaction that is either infrequent or unusual but not both should be presented how in the income statement?

A

Separately as a component of income from continuing operations

56
Q

Under IFRS, what need be done to reclassify a current note payable to non-current note payable?

A

Execute an agreement before the Statement of Financial Position date extending the note payable

57
Q

Per ASC 255, the dollar amounts of what are fixed or determinable?

A

Monetary Assets and Liabilities

Increased Inflation = Gain on Monetary Liabilities and Loss on Monetary Assets

Decreased Inflation = Loss on Monetary Liabilities and Gain on Monetary Assets

58
Q

ASC Topic 235, Notes to Financial Statements, requires what?

A

A description of all significant accounting policies to be included as an integral part of the financial statements

59
Q

Exit Activity Examples Include?

A
  1. Sale or termination of line of business
  2. Closure of business activities at a particular location
  3. Relocation of business activities
  4. Changes in mgmt structure
  5. Fundamental reorganization of the business

FAR (28 decks)

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