F2M1 Flashcards
Where is the Summary of Significant Accounting Policies located?
included as the first or second note of the financial statements
What is the first note in the financial statement:
either the summary of significant accounting policies or the nature of operations
What is the nature of operations note
Description of major products or services and its principle markets, including the location of the markets
What should be included in the notes to the financial statements
any information relevant to the decision makers; information that goes into the various calculations
Items included in summary of significant accounting policies
- measurement basis used
- basis of consolidation
- depreciation methods
- amortization of intangibles
- inventory pricing
- use of estimates
- fiscal year definitions
- special revenue recognition issues
- criteria for which investments are cash equivalent
Items not included in summary of significant accounting policies
- compositions & detailed dollar amount of account balances
- details relating to changes in accounting principles
- dates of maturity and amounts of long term debt
- yearly computation of depreciation, depletion, and amortization
What is included in subsequent event note disclosure
discontinued segments or outside ordinary courses of business
** READ**
GAAP requires management to make estimates and assumptions
When should you report significant estimates
REASONABLY POSSIBLE that it will change in the near term & change will be material
Vulnerability due to Certain COncentrations
Arise when an entity is exposed to risk of loss that could be mitigated through diversification
When should Vulnerability due to Certain Concentration be disclosed?
- Concentration exists at the financial statement date
- concentration makes entity vunerable to risk of near term severe impact
- It is at least reasonably possible that the events could cause severe impact in near term
