Unit 4 - Financial Statement Disclosure

Question 1

Segment Reporting:
What are the 3 reportable segment thresholds that must be disclosed? for

Answer 1

1 - Revenue - >= 10% of all operating segments (including sales to external customers & intersegment sales/transfers, at least 10% of the combined revenue for both external & internal)
2 - Assets - >= 10% of all operating segments
3 - Profit (loss) test - reported profit or loss is at least 10% of the greater (in absolute amount) of the combined reported profit of all operating segments that did not incur a loss, or the combined reported loss of all operating segments that did report a loss

Question 2

Segment Reporting:
What is a required entity-wide disclosure regarding external customers?

Answer 2

Information about products and services and geographical areas is reported if it is feasible to do so.
If 10% or more of revenues is derived from one external customer, (1) that fact, (2) the amount from each such customer, and (3) the segment(s) reporting the revenues must be disclosed.

Question 3

Significant Risks & Uncertainties:
What is required to be disclosed in FS under nature of operations?

Answer 3

Entities must disclose their:
(1) major products or services, (2) principal markets, and (3) the locations of those markets.
They also should disclose:
(1) all industries in which they operate; (2) the relative importance of each; and (3) the basis for determining the relative importance, e.g., assets, revenue, or earnings. Major competitors are not required to be disclosed.

Question 4

Financial Instruments:
A presentation of financial assets & financial liabilities is required to be disaggregated only by:

Answer 4

On the balance sheet or in the notes to the financial statements, financial assets and financial liabilities are separately presented (disaggregated) by:
(1) measurement category (i.e., amortized cost, fair value through net income, and fair value through OCI) and
(2) form of financial asset (i.e., loans, securities, and receivables).

Question 5

FV Measurements:
For the purpose of FMV of an asset/liability, a transaction is assumed to occur in the

Answer 5

PRINCIPAL MARKET for an asset or liability if one exists. The principal market has the greatest volume or level of activity.

Question 6

FV Measurements:
What are the 3 valuation techniques used to measure FV?

Answer 6

1 - Market approach - based on info, such as multiples of prices from market transactions involving identical/comparable items. eg. current pricing spreads on similar securities
2 - Income approach - uses valuation methods based on current market expectations about future amounts (eg. earnings or cash flows)
3 - Cost approach - based on current replacement cost; cost to build a comparable assets