Reading 22: An intro and #23, Reporting Mechanics Flashcards
what is found in a proxy statement
“provides information about management and board member compensation, as well as any conflicts of interest.”
what is found in statement of comp income
reports all changes in equity EXCEPT for shareholder transactions
what is in financial statement notes?
“discolsures that provide further deteails about the information summarized in fin. statements” (accting estimates, assumptions, methods chosen)
what is in MD&A (manager disc. and analysis)?
“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.”
how is MD&A misleading?
parts may be unauditied
what are footnotes used for by analysts?
discuss basis of presentation, ie. fiscal periods covered, provid info on accting methods, assumptions, estimates used by mgmt, bus acquisitions, etc
6 steps in financial s tatement analysis framework
state objective, gather data, process data, analyze and interpret data, report conclusions, update analysis
role of financial reporting v. financ. statement analysis
describe info on perf. results and financial position vs. evaluating the financial reports
what type of report is desired from company by auditor? qualified, unqualified, dissent?
unqualified
what occurs in the gathering data step?
“acquire company’s financial statements/ relevant data”
what occurs in process data step?
make adj. to financial stmts, cal ratios, prepare exhibits (ratios,exhibits would be OUTPUTS of this step)
what occurs in analyze/interpret data step?
“use data to answer questions stated in first step” (ratios, exhibits are INPUTS into this step)
what is the basic accounting equation?
assets = L + E
what is the expanded accounting equation?
Assets = liabilities+CC +ending RE…or…assets = liabilities + CC + beg RE -exp-div
define retained earnings
cum. NI that has not been distributed as Div, therefore RE = NI-Div
define other comp. income
“changes from foreign currency translation, min pension liabil. adj, unrealized gain/loss on investments”
accrued rev. v unearned rev
accrued=did job but not rec’d money, unearned=rec’d money, but didn’t do job yet
prepaid expexses v. accrued
prepaid=prepaid for expense, not yet happen, accrued=firm owes cash for job done already
what are the elements in financial statements related to performance?
income and expenses
what are the elements in financial statements related to financial position?
assets, liabilities and equity
what are the characteristics of a coherent financial reporting framework
transparency, comprehensiveness and consistency
what are the approaches recognized in standard setting?
rules based, principals based and objectives based
