Introduction Flashcards
What are the six steps of the financial statement analysis framework?
- Articulate purpose and context of analysis.
- Collect data
- Process data
- Analyze / interpret data
- Develop / communicate conclusions and recommendations.
- Follow-up
What is the accounting standard for multinationals?
US GAAP
Generally Accepted Accounting Principles
What is IOSCO?
International Organization of Securities Commissions, who regulate 95% of markets.
What are the three important goals of IOSCO’s Objectives and Principles of Securities Regulations?
Protecting investors
Ensuring fair, efficient and transparent markets
Reducing systemic risk
Who is the SEC?
Securities and Exchange Commission.
The regulatory authority in the US is primarily responsible for securities and capital markets regulation. It is also an ordinary member of IOSCO.
What are the most important SEC Filings for firms?
- Securities Offerings Registration Statement
- Forms 10-K, 20-F, and 40-F
- Annual Report
- Proxy Statement / Form DEF-14A
- Forms 10-Q and 6-K
What is the Securities Offerings Registration Statement?
The 1933 Act requires companies offering securities to file a registration statement. They include disclosures about the securities being offered for sale, the relationship of these new securities to the issuer’s other capital securities, the information typically provided in the annual filings, recent audited financial statements, and risk factors involved in the business.
What are the Forms 10-K, 20-F and 40-F?
Companies are required to file these forms annually. Form 10-K is for US registrants, Form 40-F is for certain Canadian registrants, Form 20-F is for all other non-US registrants. These forms require a comprehensive overview, including information concerning a company’s business, risk factors, financial disclosures, legal proceedings, and information related to management.
What is the difference between a 10-K and an annual report?
A 10-K is a SEC annual filing, while most companies also prepare an annual report to shareholders. This is not a requirement of the SEC!
What is a Proxy Statement / Form DEF-14A?
The SEC requires that shareholders of a company receive a proxy statement before a shareholder meeting.
What is a proxy?
A proxy is an authorization from the shareholder giving another party the right to cast its vote.
Shareholder meetings are held at least once a year, but any special meetings also require a proxy statement.
What are the Forms 10-Q and 6-K?
Companies are required to submit these forms for interim periods. Quarterly for US companies on Form 10-Q and semiannually for many non-US companies on Form 6-K.
What is a Form 8-K?
In addition to filing annual and interim reports, SEC registrants must report material corporate events on a more current basis. Form 8-K is the “current” report companies must file with the SEC to announce such major events as acquisitions or disposals of corporate assets, changes in securities and trading markets, matters related to accountants and financial statements, corporate governance and management changes, and Regulation FD disclosures.
What are Forms 3, 4, 5, and 144?
Form 3, 4, and 5 are required to report beneficial ownership of securities. These filings are required for any director or officer of a registered company as well as beneficial owners of greater than 10 percent of a class of registered equity securities. Form 3 is the initial statement, Form 4 reports changes, and Form 5 is the annual report. Form 144 is notice of the proposed sale of restricted securities or securities held by an affiliate of the issuer.
What is Form 11-K?
This is the annual report of employee stock purchase, savings and similar plans. It might be of interest to analysts for companies with significant employee benefit plans because it contains more information about these plans than disclosed in the company’s financial statements.
Which accounting standards do EU countries use?
International Financial Reporting Standards (IFRS)
Who are the two bodies established by the European Commission to regulate securities?
European Securities Committee (ESC) and European Securities and Market Authority (ESMA)
What are financial notes?
The notes provide information that is essential to understanding the information provided in the statements.
What is an operating segment and what do companies have to disclose about them?
An operating segment is defined as a component of a company that engages in activities that may generate revenue and create expenses, whose results are regularly reviewed by the company’s senior management and for which discrete financial information is available. A firm is required to provide some information under both IFRS and US GAAP in the notes to financial statements by operating segment.
When must a company disclose information about any operating segment?
When the segment constitutes of 10 percent or more of the combined operating segments’ revenue, assets or profit.
When must a company disclose on single customers?
If any single customer represents 10 percent or more of the company’s total revenues, the company must disclose that fact, though not the identity of that customer.
What are other words for the section of a 10-K where management discusses a variety of issues, including the nature of the business, past results, and outlook?
Management report
Management commentary
Operating and financial review
MD&A
What are five important elements of the management commentary?
Nature of the business
Management’s objectives and strategies
Company’s significant resources, risks and relationships
Results of operations
Critical performance measures
