Notes to FS

Question 1

What should the entity disclose in its annual financial statements about the two customers?

Answer 1

1. Nature of operations (how the entity generates revenues, which markets are served)
2. Use of estimates (that estimates are used and actual results may differ)
3. Certain significant estimates (disclosure of reasonably possible material changes in estimates)
4. Current vulnerability associated with certain concentrations (e.g. risks from not diversifying customer base, suppliers, product lines)

Question 2

What should be reported in the summary of significant accounting policies?

Answer 2

1. Revenue recognition policies
2. Inventory costing system (e.g. FIFO, LIFO
3. Depreciation METHOD (e.g. straight line and sum of the years’ digits)
4. Long-term contract accounting (e.g. over time at a point in time) or LONG TERM obligations
5. Criteria for CLASSIFICATION OF INVESTMENTS e.g. cash equivalents, trading securities)
6. Basis of consolidation
7. RELATED PARTY transactions
8. SUBSEQUENT events

Question 3

A company that wishes to disclose information in the FS about the effect of changing prices should report this information in ________________________________

Answer 3

Supplementary information to the FS

Question 4

Companies operating in the Same industry will report or will have _____________

Answer 4

Concentration of credit risk

Question 5

Proxy statement

Answer 5

It is the form by which management requests the right to vote through proxy for shareholders at meetings.

Question 6

Risks and uncertainties disclosures

Answer 6

1. Nature of operations
2. Use of estimates
3. Certain significant estimates
4. Current vulnerability associated with certain concentrations