Reporting the Results of Operations & IFRS Financial Statements

Question 1

What distinguishes Non-operating income from income/loss on Extraordinary items ?

Answer 1

Non-operating income stems from items that are unusual or infrequent, whereas Extraordinary gains and losses have to be BOTH unusual AND infrequent

Question 2

What is required for a component or group of components to be included on discontinued operations? What are some examples?

Answer 2

A “strategic shift” is required. Examples include:

1) Discontinued operations in a major geographical region
2) Discontinuing a major product line
3) Disposing of an equity method investment

Question 3

Are discontinued operations displayed before or net of taxes?

Answer 3

Net of taxes (it’s the first item on the multiple step I/S that is net of taxes)

Question 4

Can a business component that hasn’t been disposed of still be included in discontinued operations?

Answer 4

Yes! If it qualifies as being “held for sale”:

1) Commitment of plan to sale
2) Component is in salable condition
3) Actions to complete plan for disposal has been initiated and byer is being sought
4) Sale price is reasonable
5) Unlikelihood that significant changes will be made to plan or that it will be withdrawn

Question 5

Are expected gains and losses on discontinued operations recognized before they occur?

Answer 5

Usually not, unless there is an anticipated impairment loss (CV > NRV) at the anticipated disposal date.

Question 6

When might an expected future amount be included in income from discontinued operations?

Answer 6

When there is an anticipated impairment loss (CV > NRV) at the anticipated disposal date.

Question 7

Following the disposal of a component, how are comparative financial statements prepared?

Answer 7

The operating income attributable to the component from prior years will be moved into the discontinued operations category for the prior year in order to compare “apples to apples”

Question 8

How do IFRS and GAAP differ with regard to extraordinary items?

Answer 8

No! Extraordinary items don’t exist under IFRS

Question 9

What qualities must a transaction possess in order to be booked as an Extraordinary item?

Answer 9

1) Unusual in nature
2) Infrequency of occurrence
3) Material

Question 10

How is comprehensive income required to be displayed?

Answer 10

In one of two ways:

1) As a separate statement of comprehensive income (immediately following the income statement)
2) In a combined statement of income and comprehensive income

Question 11

What comprises other comprehensive income (OCI)?

Answer 11

“D-E-N-T”

1) Derivative cash flow hedges
2) Excess adjustment of Pension PBO and FV of Plan assets at year end
3) Net unrealized gain/loss of Available-for-sale Securities
4) Translation gains and losses

Question 12

What comprises comprehensive income?

Answer 12

Net income + OCI

Question 13

Are prior period adjustments included in comprehensive income?

Answer 13

Despite being a form of comprehensive income, isn’t reported in the OCI section of the statement, but rather is reported on the Statement of Retained Earnings

Question 14

What type of expense is interest expense?

Answer 14

Non-operating (not G&A)

Question 15

How does IFRS refer to interest expense?

Answer 15

Finance or financing costs

Question 16

What did the 1933 Federal Securities Act establish?

Answer 16

“S-P-I-N”

Companies satisfying the following are required to register with the SEC:

1) Securities
2) Public Issue
3) Interstate commerce
4) No exemptions

Question 17

What did the 1933 Federal Securities Regulation Act establish?

Answer 17

Ongoing reporting requirements for publicly traded companies

Question 18

What does Regulation S-K establish?

Answer 18

Requirements for the content of nonfinancial data that companies with registered securities must file with the SEC.

Question 19

What does Regulation S-X establish?

Answer 19

Requirements for the content of financial data that companies with registered securities must file with the SEC.

Question 20

What are the filing deadlines for filing a form 10K?

Answer 20

60 days if > $700M (large accelerated filer)

75 days if >$75M, but

Question 21

What are the filing deadlines for filing a form 10Q?

Answer 21

40 days if large or accelrated (>$75M)

45 days if small (

Question 22

When is an 8K filed? What are the filing deadlines associated with its filing?

Answer 22

When there is an event of major significance, such as a bankruptcy, change in directors, acquisition or disposal of assets, change in executive officer or auditor. Required to be filed within 4 days of event.

Question 23

Under IFRS, what comprises a complete set of financial statements?

Answer 23

1) Statement of financial position
2) Statement of profit or loss and OCI
3) Statement of changes in equity
4) Statement of cash flows
5) Notes containing significant accounting policies and other info

Question 24

Under IFRS, can assets and liabilities or income and expenses be offset against each other?

Answer 24

No, neither are permitted under IFRS unless they apply to allowance accounts (depreciation, etc.)

Question 25

What are the five key elements in IFRS?

Answer 25

1) Assets
2) Liabilities
3) Equity
4) Income (includes revenues and gains)
5) Expenses (includes expenses and losses)

Question 26

Does IFRS also use the term net income?

Answer 26

No, PROFIT is the preferred term

Question 27

Do GAAP and IFRS recognize biological assets?

Answer 27

Only IFRS statements do.

Question 28

Under IFRS, are deferred tax liabilities and assets ever current?

Answer 28

No, they are always non-current

Question 29

How do IFRS and GAAP differ in reporting interest received on the statement of cash flows?

Answer 29

Under GAAP, interest received is an operating activity, whereas it can be either an operating activity or investing activity under IFRS (just has to be consistent).

Question 30

How do IFRS and GAAP differ in reporting interest paid on the statement of cash flows?

Answer 30

Under GAAP, interest paid is a financing activity, whereas it can be either an operating or financing activity under IFRS (just has to be consistent).

Question 31

How do IFRS and GAAP differ in requiring comparative information?

Answer 31

IFRS requires comparative information, whereas it is optional under GAAP

Question 32

Does IFRS have a preferred order of assets and liabilities on the balance sheet?

Answer 32

No, as long as they are consistent in the same order for assets and liabilities, they can be listed in any order (such as noncurrent before current). Recall that GAAP requires them to be in the order of liquidity.