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1Financial Reporting > Module 9d > Flashcards

Module 9d Flashcards

1
Q

What is the difference in a multi step income statement and a single step income statement?

A

Multi-step income statements group items together as a product costs and Single stem takes all revenues and deducts all expenses in a period fashon

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2
Q

What are unusual or infrequent items? And where are they presented in the income statement?

A

Material item that does not qualify as extraordinary. It is placed as part of income from continuing operations after normal recurring revenues and expenses

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3
Q

What are discontinued operations? And where are they presented on the income statement?

A

They are results from disposal of business components. They are placed as a separate category after income from continuing operations

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4
Q

What are extraordinary items?

A

Unusual and infrequent nonreoccuring events which has material effects. They are placed as a seperage category after discontinued operations.

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5
Q

What are the requirements for an unusual or infrequent items?

A

Items that happen, that are still clasiffied income from continuing operations

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6
Q

What is an example of an unusual or infrequent item?

A

Restructuring charges. Disposal activities

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7
Q

If an item is unusual and infrequent, where should it be presented on the financial statements?

A

It should be presented as an extraordinary items

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8
Q

What are some examples of items that are never extraordinary?

A

Write-down of assets (A/R, Inventory, PPE, Intangibles) Labor Strikes, Currency devaluation.

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9
Q

What are Discountinued Operations?

A

Results from disposal of a business componet

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10
Q

What are the 2 requirements for a classification of Discontinued Operations?

A

1) Operations & Cash flows of the component have been eliminated, 2) Entity will hve no significant involvement in the operations going forward.

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11
Q

The assets of a discontinued operation can be classified as “held for sale” If?

A

1)Managament has a plan of disposal 2) assets are available for sale 3)looking for a buyer 4)sale is probable 5)They are marked at a fair price 6)it is unlikely the plan to sale the assets will change significantly.

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12
Q

What is the GAAP definition of Comprehensive Income?

A

Net Income + Other Comprehensive Income

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13
Q

Where can you present other comprehensive income on the financial statements?

A

1) At the bottom of the income statement. 2)In a separate statement that may start with net income (that directly follows the statement of income.

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14
Q

If Net Income closes to Retained earnings, where does Comprehensive Income close?

A

Into Accumulated Other Comprehensive Income.

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15
Q

Are items in Comprehensive Income presented Net of Tax?

A

Yes

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16
Q

Remember when clasiffing Available for Sale Securities that you have to do a reclasiffication adjustment (reversing entry) to avoid Double counting.

A

No Answer

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17
Q

What is another name for the Balance Sheet

A

Statement of Financial Position

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18
Q

At what period is it presented

A

It is presented at a particular date.

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19
Q

What is a Current item?

A

A item that are resonably expected to be realized in the the next year from the financial statement date

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20
Q

What is a Deferred item?

A

An item that will not be realized within the following year

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21
Q

What are examples of Other Financial Statement concepts?

A

Related Party Disclosures, Accounting Policies, Subsequent Events, Fair Value measurments.

22
Q

What is a related party disclosure?

A

Certain transactions between related parties must be disclosed.

23
Q

Who is considered a related party?

A

Affiliates, Power to direct or cause direction (Control), Immediate Family, Management, Principle Owners.

24
Q

What items do not have to be disclosed?

A

Compensation agreements, Expense Allowances

25
Q

What accounting Policies must be set forth in the initial footnotes to the statement?

A

Accounting Principles used. (Method of Depreciation, invenory management, etc)

26
Q

What are Subsequent Events?

A

Itmes occuring after the balance sheet date, but before the Financial Statements are issued

27
Q

What are the two types of Subsequent Events?

A

Recognized and Nonrecognized

28
Q

What is a recognized subsequent event?

A

an event in which the conditino existed at the balance sheet date and, therefore, is recognized in financial statements

29
Q

What is a nonrecognized subsequent event?

A

an event in which the condition did not exist at the balance sheet date, but arose after the balance sheet date. The event is NOT recognized in the financial statements, However it should be disclosed in the footnotes the nature of the event and an estimate of the effects

30
Q

What are fair value measures?

A

IT is the price that would be to sell an asset, or to transfer a liability in and orderly fashion between market participants at the measurment date.

31
Q

What is the critery for valuing an asset at fair value? (6 items)

A

1) identify the asset to be measured. 2)Determine the most advantageous market. 3)Determine the valuation premise. 4)Determine the appropriate valuation technique. 5)Obtain inputs for valuation. 6)calculate the fair value.

32
Q

What valuation techniques line up with inputs for valuation

A

Market - Level 1. Cost Approach - Level 2. Income - Level 3

33
Q

What does the fair value option apply to?

A

Financial assets and liabilties, firm commitments, written loan commitments, nonfinancial insurance contracts that can be settled by a paying 3rd party, warranties settled by 3rd parties,

34
Q

What does the fair value option not apply to?

A

Consolidations, pensions, share based payments, stock options, exit or disposal activities, leases

34
Q

What is an example of the Market Based Approach for Fair Value measurment?

A

Level 1 uses quoted prices from active markets (NYSE, NASDAQ)

35
Q

What is an example of a Income Approach (Level 2) to fair value measurement?

A

Directly or indirectly observable inputs from observable items. Quoted prices for similar items, yield curves, bank prime rates, interest rates, prepapayment speeds, credit risks. PV of cash flows

36
Q

What are some examples of Cost Approach (level 3) valuation technique for fair value measurement?

A

Observable inputs are not available. Pricing a three year option using the historical volatility of shares, valuing an asset retirement obligation using expected cash flows.

37
Q

What is the order of the Multi-step income statement?

A

Sales -COGS = Gross Margin - Operating expenses = Operating Income +Other Reenues and Gains - Other Expenses and Losses = income from continuing operations before taxes - Provision for Taxes = income from continuing operations - Discontinued Operations = income before extraordinary item +- extraordinary item = Net Income

38
Q

What is an unusual or infrequent item? and where is it placed on the income statement?

A

An unusual or infrequent event considered to be material that does not qualify as extraordinary. In is placed on the income statement as part of continuing operations.

39
Q

What are discontinued operations? and where are they placed on the income statement?

A

They are results from disposal of a business component. They are placed on the income statement as a separate category after income from continuing operations.

40
Q

What is an extraordinary item?

A

An unusual and infrequent nonrecurring event that has material effects. It is placed on the income statement as a seperate category after income from discontinued operations.

41
Q

What is a change in accounting principle and where is it on the income statement?

A

It is a change from one GAAP principle to another. It is no longer placed on the income statement. It received retrospective application where previously stated income statements are restated to correct them.

42
Q

What are examples of unusual or infrequent items?

A

Sale or termination of a line of business, closure of a particular location. Relocation of a particular location. Changes in management structure. Reorganizations. Exits and disposal activities. (Exit and disposal activities should be recognized in the period incurred, by using the PV of the estimated future payment).

43
Q

What is Prospective Financial information?

A

It is any financial information about the future.

44
Q

Who are the users of Prospective Financial information?

A

Management would use to for Financial forecasting. Parties from whom an entity is negotiating directly, and any 3rd parties for whom the entity is negotiating.

45
Q

What are some reasons to prepare a prospective financial forecast

A

1) to obtain external financing. 2) To Consider a change in accounting or operations. 3) To Prepare Budgets

46
Q

What companies must comply with SEC Regulations?

A

Companies that trade on national securities exchanges, and companies with assets of more than $10M or 500 or more shareholders.

47
Q

What is form S-1

A

A registration statement for US Companies

48
Q

What is form 8-K

A

It contains information about material events for US companies.

49
Q

What is form 10-K

A

It is an annual report for US Companies

50
Q

What is a form 10-Q

A

It is a Quarterly report

51
Q

What financial statements must a trust Disclose

A

A Statement of Assets and Liabilities, a statement of operations, and a statement of changes in net assets.

1Financial Reporting (21 decks)

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