Risks and Uncertainties Flashcards
When must Disclosures of significant estimates be made?
It is at least reasonably possible that the estimate of the effect on the financial statements will change in the near term due to one or more future confirming events (reasonably possible is the chance is more than remote but less than likely).
The effect of the change would be material.
What is Off Balance Sheet Risks?
the amount of an accounting loss exceeds the amount of the associated asset or liability recorded on the balance sheet.
Asset is worth 350,000 and I would have to pay 380,000 That’s a 30,000 off balance sheet risk item
Vulnerability to concentrations refers to risk due to a lack of diversification. Disclosure of such risk must be made if, based on management’s information, the following criteria are met
The concentration exists at the date of the financial statements.
The concentration makes the entity vulnerable to the risk of a near-term severe impact.
It is at least reasonably possible that the events that could cause the severe impact will occur in the near term
Topic 275 of FASB ASC Risks and Uncertainties relates to?
the nature of the entity’s operations.
the use of estimates in the preparation of the entity’s financial statements.
significant concentrations in certain aspects of the entity’s operations.
Primary subject discussed is “Disclosures”
What are examples of items that require significant disclosure?
Inventory subject to rapid technological obsolescence
Specialized equipment subject to technological obsolescence
Environmental remediation-related obligations
Contingent liabilities for obligations of other entities
Amounts reported for long-term obligations, such as amounts reported for pension and postemployment benefits
Estimated net proceeds recoverable, the provisions for expected loss to be incurred, or both, on disposition of a business or assets
what element is identified as important in determining the matters that are significant to a specific entity?
Selectivity
