Reporting the Results of Operations & IFRS Financial Statements Flashcards
WHAT would be an item that’s reported on the Income Statement (I/S) of a proprietorship?
Depreciation (Expense)
NOTE: Proprietor’s draw (owner’s draw) is equivalent to a payment of dividends and is a direct reduction of equity.
- It is NOT included in the income statement.
WHAT are some items that would be considered “General and Administrative Expenses?”
- Accounting and legal fees
- Officers salaries
- Insurance
True or False.
THE pro forma effects of a retroactive application are to be reported.
FALSE.
THE pro forma effects of a retroactive application are NOT reported.
True or False.
A change in the expected service life of an asset is a change in accounting principal.
FALSE.
A change in the expected service life of an asset is a change in accounting estimate.
No cumulative effect is computed. It is reported by applying the new estimate in the current and all future periods.
BOTTOM LINE: IT is NOT Reported retrospectively BUT Prospectively
Fill in the Blank.
When reporting the __A__ from disposal of a discontinued segment, __B__ from the measurement date through the __C__ are included.
A. gain or loss
B. all items
C. date of sale
WHAT is the accounting treatments WHEN a company enters into a purchase commitment to buy inventory and the current market value of the inventory was less than the fixed purchase price?
Describe the nature of the contract in a note to the financial statements, recognize a loss in the income statement;
- and recognize a liability for the accrued loss
NOTE: The corporation should also describe the nature of the loss in a note to its financial statements.
WHAT type of expense is advertising expense?
A selling expense
i.e. Advertising Expense is NOT a “general and administrative expense”
HOW does an item meet the definition of an “operating segment?”
IT can be clearly distinguished from the rest of a company’s operations
HOW would you calculate “Ending retained earnings?”
Beginning retained earnings plus Net Income (I/S) less Dividends
HOW do you calculate your Comprehensive Income?
Net Income (N/I) plus Other Comprehensive Income (OCI)
Fill in the Blank.
Similar to GAAP, IFRS requires errors to be corrected __A___.
A. retrospectively
E.g. If an error occurred in Year 1, but the entity starts reporting in Year 2, the statement of financial position for Year 1 would be corrected for the amount of the loss accrued but recorded in Year 1 ONLY
Fill in the Blank.
Disclosures should…….
(1) NOT duplicate details disclosed elsewhere in the financial statements
(2) be an integral part of the financial statements
WHAT happens when you fail to accrue sales commissions earned in an operating year?
INCOME would be overstated and current liabilities would be understated
THIS would cause working capital to be overstated
NOTE: If the expense is paid in the following year this would correct Retained Earnings (HOW?), because the accrued expense would be overstated and net income understated by the same amount from the previous year
WHAT happens if a company enters into a multi-year, non-cancelable contract and decides to cancel sales of the product in the midst of the contract?
THEY would be on the hook for the “minimal annual guarantee” amount from the contract for the contract period
(e.g. Three-years)
WHEN calculating the date of transition to IFRS…….
You would use the date of the earliest statement of financial position presented in the entity’s first set of IFRS financial statements
E.g. company will present one year of comparative information…..and the company adopts IFRS in the middle of the second year…the earliest period will be as of 1/1/1 to prepare Balance Sheet (B/S)
WHAT is included in the loss on disposal WHEN a segment of a business is to be disposed of?
(1) Losses from the measurement date to the date of disposal
2) Costs associated with the disposition (i.e. employee relocation costs and additional pension costs
Triky……Tricky
Customer installs product in their store for use to display its merchandise; what would be included in their multi-step Income Statement (I/S)?
One-fifth of the installed product’s costs in selling, general, and administrative expenses
WHY? - Because it was used to display products for SALE in their store; therefore they would report this information as part of their selling expenses
True or False.
Exchanged merchandise reduces total sales and should be included in the calculation of net sales.
FALSE.
Exchanged merchandise does not reduce total sales since it will be exchanged for merchandise of equal or greater value.
Therefore it would not be included in the calculation of net sales.
WHAT are some items that you would subtract when calculating your gain/ loss on disposal of an unprofitable division of a business?
(1) Building(s)
(2) Inventory
(3) Assumption of Accounts Receivable (A/R)
WHAT are some items that you would add when calculating your gain/ loss on disposal of an unprofitable division of a business?
(1) Cash received
(2) Accumulated depreciation
(3) Debt relief from building mortgage
(4) Relief from accounts payable
