SU # 4: Financial Statement Disclosure Flashcards
4.2 Segment Reporting
Overview:
What is segmentation based on?
internal organizational structure & the availability of separate financial information
4.2 Segment Reporting
Overview:
Identify the 3 characteristics of an operating segment
1 - it is a business component of the entity that may recognize revenues and incur expenses
2 - operating results reviewed by the chief operating decision maker (CODM)
3 - financial information is available
4.2 Segment Reporting
Overview:
Identify the 3 requirements that must be present to aggregate or combine operating segments
1 - consistent with the objective
2 - similar economic characteristics
3 - similar products and services, production processes, classes of customers, distribution methods, and regulatory environments
4.2 Segment Reporting
Quantitative Thresholds:
What is a reportable segment?
- an operating segment that must be separately disclosed if it meets quantitative thresholds
4.2 Segment Reporting
Quantitative Thresholds:
Calculate consolidated revenue
Revenues - Intersegment Revenue
4.2 Segment Reporting
Disclosures for Each Reportable Segment:
Identify the additional amounts that should be disclosed for each reportable segment if they are included in the measure of profit or loss and reviewed by the CODM
HINT: Real Interest Definitely Deserves Unique Earnings In Optimization
- Revenues from external customers and other operating segments,
- Interest revenue and expense,
- Depreciation,
- Depletion and amortization,
- Unusual items,
- Equity in the net income of equity-based investees,
- Income tax expense or benefit, and
- Other significant noncash items
4.2 Segment Reporting
Entity-Wide Disclosures:
Identify the information reported about geographic areas for entity-wide disclosures
HINT: Every Man Buys Cologne
- external revenues attributed to the home country and to all foreign countries,
- material external revenues attributed to an individual foreign country,
- basis for attributing revenues from external customers, and
- certain information about assets.
4.1 Significant Accounting Policies
Presentation and Disclosure:
When should accounting policies be disclosed?
Memory Aid: Still Present Gaap
- selection from existing acceptable alternatives
- when policies are unique to the industry in which the entity operates, even if predominantly followed in that industry
- GAAP applied in an innovative or unusual way
4.1 Significant Accounting Policies
Presentation and Disclosure:
What information is required to be disclosed about the policies of businesses?
Memory Aid: Boys Don’t Always Internalize Real Rage
- Basis of consolidation
- Depreciation methods
- Amortization of intangibles
- Inventory pricing
- Recognition of revenue from contracts with customers
- Recognition of revenue from leasing operations
4.5 Subsequent Events
Unrecognized Subsequent Events:
Provide examples of nonrecognized subsequent events requiring disclosure only
Memory Aid: Sexy Beautiful Shanitta Lofty Lady
- Sale of a bond or capital stock issue
- Business Combination
- Settlement of litigation when event resulting in claim occurred after balance sheet date
- Losses on receivables resulting from conditions occurring after balance sheet date
4.6 Financial Instruments
Concentration of Credit Risk:
What is credit risk?
risk of accounting loss from a financial instrument because of the possible failure of another party to perform
4.6 Financial Instruments
Concentration of Credit Risk:
Identify 4 exceptions to disclosing significant concentrations of credit risk arising from financial instruments
Memory Aid: I Can Win Unconditionally
- instruments of pension plans
- certain insurance contracts
- warranty obligations and rights
- unconditional purchase obligations
4.7 Fair Value Measurements
Definitions:
Who are market participants?
- unrelated parties
- knowledgeable
- willing & able to engage in transactions involving the assets or liabilities
- independent of the reporting entity
4.7 Fair Value Measurements
Definitions:
What is the principal market for an entity?
- Principal market maximizes net proceeds
4.7 Fair Value Measurements
Definitions:
What is the most advantageous market of an entity?
Market in which the entity can:
- maximize amount received for selling the asset or
- minimize amount paid for transferring the liability, after considering transportation and transaction costs
