Module 19.1 & 19.2: Financial Statement Roles

Question 1

What is financial reporting?

Answer 1

the way companies show their financial performance to investors, creditors, and other interested parties.

Question 2

What is the role of financial statement analysis?

Answer 2

use the information of the company’s financial statements, along with other relevant information, to make economic decisions.

Question 3

What is the statement of comprehensive income?

Answer 3

reports all changes in equity except for shareholder transactions (i.e issuing stock).

Question 4

What are financial statement notes?

Answer 4

include disclosures that provide further details about the information summarized in the financial statements.

Question 5

what is the Management’s Discussion and Analysis (MD&A)

Answer 5

can be one of the most useful sections of the annual report. IFRS and SEC both have different guidelines on what must be said in the MD&A.

Question 6

What does the IFRS require to be said in the MD&A

Answer 6

nature of the business
management's objectives
the company's past performance
the performance measures used
and the company's key relationships, resources, and risks.

Question 7

What does the SEC require to be said in the MD&A

Answer 7

1) trends and identify significant events and uncertainties that can effect firms liquidity
2) capital rescources
3) results of operations.
4) effects of inflation and changing prices if material
5) impact of off balance sheet oblifgations
6) accounting policies that require judgement
7) forward looking expenditures.

Question 8

What are the three parts of the standard auditor’s opinion?

Answer 8

1) whereas the financial statements are prepared by management the auditor performed an independent review.
2) generally accepted accounting standards were used, thus providing a reasonable assurance.
3) the auditor is satisfied that the statements were prepared in accordance with GAAP. also must contain explanation when accounting methods are not consistent.

Question 9

what is an audit unqualified opnion, qualified opinion, adverse opinion, and disclaimer of opinion?

Answer 9

unqualified - fin statements are pefect

qualified - exceptions from GAAP

adverse - not presented fairly

disclaimer - cannot make an opinion

Question 10

What are proxy statements?

Answer 10

financials that are issued when the shareholders need to vote.

Question 11

What are the six steps of financial analysis framework?

Answer 11

1) State the objective and context
2) Gather data
3) Process the data
4) Analyze and interpret the data
5) Report the conclusions or recommendations
6) Update the analysis