I-introduction-5

Question 1

role of Financial Reporting

role of Financial Statement Analysis

Answer 1

• providing information about the performance and financial position of the company, so that users can make economic decisions
• evaluating the company, form expectations of future performance, thus make economic decision

Question 2

two systems worldwide

Answer 2

1. US: Financial Accounting Standards Board (FASB)

U.S. GAAP (Generally Accepted Accounting Principle)

2. International Accounting Standards Board (IASB)

IFRS: the International Accounting Standards (IAS) + the International Financial Reporting Standards (IFRS)

Question 3

measurement of financial elements

Answer 3

• Historical cost 历史成本
• Amortized cost 摊余成本 (net book value 账面净值)
• Current cost 重置成本
• Realizable value 可变现净值
• Present value 现值
• Fair value 公允价值

Question 4

Statement of Comprehensive Income

Answer 4

C.I. = Net Income + Other Comprehensive Income

Question 5

Financial notes

include 4

Answer 5

• fiscal period
• accounting methods, assumptions, estimates
• explanatory information about every line item on FSs
• 必须接受审计

Question 6

Management’s Discussion & Analysis

MD&A

include 4

Answer 6

• nature of the business
• past results
• future outlook
• material uncertainty

Question 7

Proxy Statements

include 3

Answer 7

• voting issues
• management compensation
• potential conflict of interests

Question 8

Auditor’s report

purpose

components

Answer 8

• purpose: to ensure the financial statements are complied with accounting principles and that the selection of principles and estimates are on reasonable base
• Auditor’s opinon + internal control system

Question 9

standard auditor’s opinion

4

Answer 9

• Unqualified (clean) opinion: 标准无保留意见 （reasonable assurance）
• Qualified opinion: 保留意见 explanations to present
• Adverse opinion: 反对意见 unfairly presented
• Disclaimer of opinion: 无法出具意见, 缺乏基础材料

Question 10

Financial Statement Analysis Framwork

6 steps

Answer 10

Question 11

management compensation

where can be found?

Answer 11

• required in proxy statement
• some aspects disclosed in the footnotes

Question 12

owner’s equity

6 accounts

(OCI include 4)

Answer 12

• capital contributed by owners/capital (common stock + preferred stock)
• additional paid-in capital
• Treasury shares
• retained earnings
• OCI: other comprehensive income
  
  • foreign currency translation
  • pension liability adjustments (DB)
  • unrealised cash flow hedging
  • unrealised available-for-sale
• Noncontrolling interest (minority interest)

Question 13

information flows through

accounting system

5 steps

Answer 13

1. General Journal: by date; entries
2. General Ledger: by account
3. Initial trial balance试算平衡: shows only total ending balances
4. adjusted trial balance
5. present financial statements

Question 14

Regulating authorities in US

roles 2

Answer 14

• US: Securities and Exchange Commission (SEC)
• role1: recognise and enforce standards (put forward by standard setting bodies, FASB)
• role 2: can overrule standards

Question 15

国际证监会组织

名称

objectives 4

Answer 15

• International Organization of Securities Commissions (IOSCO)
• protecting investors
• ensuring fairness, efficiency, transparency of market
• reduce systemetic risk
• set universal financial regulations

Question 16

SEC filing requirements

• Form S-1
• Form 10K (20F)
• Form 10Q (6K)
• Form DEF-14A
• Form 8K
• Form 144
• Form 3,4,5
• 注意

Answer 16

Form S-1: IPO招股说明书

Form 10K (20F) 年报（境外）

Form 10Q (6K) 季报（境外-半年报）

Form DEF-14A proxy statement

Form 8K 重大事项公告

Form 144 定增

Form 3,4,5 内部高管持股

• Annual report不要求file，不同于form 10K, Annual report是给投资人看的

Question 17

two accounting systems

barriers to convergence 2

Answer 17

• 不同意某些科目的最优处理
• politcal pressure

Question 18

IASB Conceptual Framework

Qualitative character 2

Enhancement character 4

Answer 18

• relevance
• faithful representation
• understandability
• comparability
• verifiability
• timeliness

Question 19

IASB conceptual framework

General features

• going concern
• accrual basis
• fair representation
• materiality & aggregation
• comparative
• consistency
• no offsetting
• reporting frequency

Structure of content

• classified balance sheet
• minimum information
• comparative information

Answer 19

fair representation: faithful representation

materiality & aggregation:相关科目合并

no offsetting: asset/liability, revenue/expense

reporting frequency: at least one year

classified balance sheet: 分类列示流动/非流动

minimum information:最少披露信息要求

Question 20

major differences between IASB and FASB

3

Answer 20

• definition of asset: US “benefit”, Itnl “resource”
• rev. recognition: US “highly likely” 要求更严，IFRS”more probable than not”
• US: 【before 2008】used to require reconsiliation statement, now doesn’t, can report either under GAAP or IFRS

Question 21

3特点 - coherent FR framework

barriers to single coherent framework

valuation

standard-setting approach

measurement

Answer 21

• transparency, comprehensiveness, consistancy
• historical cost: more reliable, minimal judgement, fair value: 很多judgement, but more relevant
• IASB: principle based 管得宽， FASB: rule-based 管得细, now objectives-based 混合
• 以B/S为出发点制定standards，或者以I/S为出发点定制。都会引起另一者连带变动

Question 22

分析师从哪几个角度

monitor developments in FR standards

Answer 22

• new products/transactions
• evolving standards/跟踪CFA网站
• company disclosures

Question 23

Under the joint conceptual framework project of the IASB and the FASB, accounting standards should be

Answer 23

principles based, internally consistent,and converged

Question 24

The converged revenue recognition standard issued in May 2014 by the

IASB and FASB

one example industry likely to be affected

Answer 24

with bundled sales, such as the telecommunications services industry.