Reading 22: An intro and #23, Reporting Mechanics

Question 1

what is found in a proxy statement

Answer 1

“provides information about management and board member compensation, as well as any conflicts of interest.”

Question 2

what is found in statement of comp income

Answer 2

reports all changes in equity EXCEPT for shareholder transactions

Question 3

what is in financial statement notes?

Answer 3

“discolsures that provide further deteails about the information summarized in fin. statements” (accting estimates, assumptions, methods chosen)

Question 4

what is in MD&A (manager disc. and analysis)?

Answer 4

“nature of the bus, past perf, future outlook.” includes “effects of inflation&changing prices, impact of off bal sheet obligations, accting policies that require judgmt by mgmt,fwd looking expenditures.”

Question 5

how is MD&A misleading?

Answer 5

parts may be unauditied

Question 6

what are footnotes used for by analysts?

Answer 6

discuss basis of presentation, ie. fiscal periods covered, provid info on accting methods, assumptions, estimates used by mgmt, bus acquisitions, etc

Question 7

6 steps in financial s tatement analysis framework

Answer 7

state objective, gather data, process data, analyze and interpret data, report conclusions, update analysis

Question 8

role of financial reporting v. financ. statement analysis

Answer 8

describe info on perf. results and financial position vs. evaluating the financial reports

Question 9

what type of report is desired from company by auditor? qualified, unqualified, dissent?

Answer 9

unqualified

Question 10

what occurs in the gathering data step?

Answer 10

“acquire company’s financial statements/ relevant data”

Question 11

what occurs in process data step?

Answer 11

make adj. to financial stmts, cal ratios, prepare exhibits (ratios,exhibits would be OUTPUTS of this step)

Question 12

what occurs in analyze/interpret data step?

Answer 12

“use data to answer questions stated in first step” (ratios, exhibits are INPUTS into this step)

Question 13

what is the basic accounting equation?

Answer 13

assets = L + E

Question 14

what is the expanded accounting equation?

Answer 14

Assets = liabilities+CC +ending RE…or…assets = liabilities + CC + beg RE -exp-div

Question 15

define retained earnings

Answer 15

cum. NI that has not been distributed as Div, therefore RE = NI-Div

Question 16

define other comp. income

Answer 16

“changes from foreign currency translation, min pension liabil. adj, unrealized gain/loss on investments”

Question 17

accrued rev. v unearned rev

Answer 17

accrued=did job but not rec’d money, unearned=rec’d money, but didn’t do job yet

Question 18

prepaid expexses v. accrued

Answer 18

prepaid=prepaid for expense, not yet happen, accrued=firm owes cash for job done already

Question 19

what are the elements in financial statements related to performance?

Answer 19

income and expenses

Question 20

what are the elements in financial statements related to financial position?

Answer 20

assets, liabilities and equity

Question 21

what are the characteristics of a coherent financial reporting framework

Answer 21

transparency, comprehensiveness and consistency

Question 22

what are the approaches recognized in standard setting?

Answer 22

rules based, principals based and objectives based