Notes to Accounts

Question 1

Summary of Significant Accounting Policies

Answer 1

-Integral
- Describes accounting principles, methods and policies used to prepare the accounts
- Depreciation or amortization method used
- Inventory valuation technique used
- Revenue Recognition technique used
- Significant estimates made
- basis of consolidation

Include
- Accounting principles applied especially when there was a choice of alternative policies
- Principles specific to a particular industry
- Unusual/ unique/ innovative applications of accounting Principle

DO NOT INCLUDE
- Details presented somewhere else in the basic financial statements and duplicated.

Question 2

Other Notes in Notes to Accounts

Answer 2

• Pension Plan Descriptions
• Fair Value of Financial instruments
• Business Combinations
• Contingencies
• Accrued liabilities & other
• Segment reporting Information
• Bonds
  -Leases
• Information about Property, Plane & Equipment

Question 3

Disclosure related to Related Parties in Notes to Accounts

Answer 3

Who are related parties?
- Affiliates
- Parent or subsidiary entities or subsidiaries of a common parent
- Employee benefit trusts
- Owners of over 10% of voting interest
- Management and their immediate family members

What transactions must be disclosed?
- Nature of relationship
- Description of Transaction
- Amount of Transactions
- Amount outstanding as of end of year

Which transaction needs not be disclosed?
- Transactions in ordinary course of business such as salary and expense reimbursement
- Transactions eliminated in consolidation

Question 4

Disclosure related to subsequent events in notes to accounts

Answer 4

Recognized subsequent event/adjusting events
- Conditions existed on balance sheet date
- Settled after balance sheet date but before financial statement release date
- Recognize and disclose

Non-recognized subsequent event/non-adjusting events
- Conditions did not exist on balance sheet date
-settled after balance sheet date but before financial statement release date
-only disclosure

Question 5

Disclosure related to going concern doubt in notes to accounts

Answer 5

Substantial doubts about an entity to continue as a going concern exists when conditions and events exists that indicate that the management will not be able to meet its liabilities in next one year.

Conditions do not indicated substantial doubt
- No disclosure

Conditions indicate substantial doubt
- Principal conditions or events that raised substantial doubt
- Managements evaluation of those significant events
- Managements plans that alleviate substantial doubt.
- If substantial doubt not alleviated must disclose that there is a substantial doubt about entity’s ability to continue as a going concern.

Question 6

Disclosures related to risks and uncertainties in Notes to Accounts

Answer 6

-Nature of Operations
- estimates used in preparing financial statements
- Concentration risk
-Customers, suppliers, lenders, guarantors, or contributors
- Revenue sources
- Supply of material and labor
- Licenses

• Market of geographical areas.