Notes to Financial Statements

Question 1

What is a monetary item?

Answer 1

Something that has a right/obligation to deliver a fixed amount. Cash, AR, Debt

Question 2

What is a nonmonetary item?

Answer 2

Items whose value may change. Property Plant & Equipment, Intangibles.

Usually report value as replacement cost

Question 3

In a period of rising prices, how are monetary items affected?

Answer 3

The purchasing power of assets decreases.
The purchasing power of liabilities increases. The dollar amount of debt remains constant while the value of the dollar increases.

Question 4

When is the disclosure of fair values of financial instruments required?

Answer 4

When it is practicable and estimate and aggregate fair values that are material.

Question 5

What information is reported in the supplementary disclosure to the financial statements?

Answer 5

Information that is not integral such as disclosing the effects of changing prices

Question 6

What is the meaning behind nominal dollars?

Answer 6

Nominal dollars includes inflation.

Question 7

What is the meaning behind constant dollars?

Answer 7

This value does NOT include inflation.

Question 8

What are required disclosures for an entity with plans that remove thoughts of going concern.

Answer 8

Must disclose:

Conditions
Evaluations
Plan

Question 9

What is the summary of significant accounting policies?

Answer 9

Summary of principles and methods choosen by management where GAAP allows choices.

Question 10

What is usually not reported on the summary of significant accounting policies?

Answer 10

Information detailing accounts such as inventory and plant.

Question 11

What are the disclosures of risk and uncertainties?

Answer 11

Nature of ops
Use of estimates
Certain significant estimates
Concentration risk