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Flashcards in 9D Basic Theory And Financial Reporting Deck (272):
0

Multiple step income statement:
Totman Company
Statement of Earnings and Comprehensive Income
For the Year Ended December 31, Year 2

include all line items

Sales
COGS
Gross margin on sales
Operating expenses:
Selling expenses
Administrative expenses
Operating income
Other revenues and gains:
Interest revenue
Equity in investee earnings
Gain on sale of AFS securities
Other expenses and losses:
Interest expense
Loss from permanent impairment of facilities
Income from continuing operations before provision for income taxes
Provision for income taxes
Current
Deferred
Income from continuing operations
Discontinued operations:
Loss from operations of discontinued division Z
Income tax benefit
Income (loss) before extraordinary item:
Extraordinary item: loss due to earthquake
Net earnings (loss)
Other comprehensive income:
Foreign currency translation adjustments
Unrealized gains on securities:
Unrealized holding gains arising during period
Less: reclassification adjustment for gain included in net income
Other comprehensive income
Comprehensive income

1

Equation for net sales

Gross sales
- sales discounts
- sales returns and allowances
= net sales

2

COGS AKA COS is a...

Product cost

3

Equation for gross margin AKA gross profit

Net sales
- COGS/COS
= gross margin/or gross profit

4

Equation for cost of goods sold under the periodic system of inventory

Beginning inventory
+ COG Purchased
__________________
cost of goods available for sale
- ending inventory
_______________________
COGS

5

COGAS

Cost of goods available for sale

6

Periodic inventory system of inventory calculation for Cost of goods purchased

Gross purchases
- purchase discounts
- purchase returns and allowances
________________________
Net purchases
+ freight in/or transportation in
__________________________
COG Purchased

7

Operating expenses include 6 expenses

1 selling
2 R&D
3 general + administrative
4 organizational costs
5 impairment loss (for SEC registered)
6 Bad debt expense

8

Organizational costs

Start up/ pre opening costs for businesses

9

G + A

General and administrative expense

10

2 common examples of General and administrative expenses

1 pay auditors

2 internal controls

11

How do you calculate operating income/operating profit?

Gross margin/GP
- Operating expenses
________________
Operating income/operating profit

12

How do you calculate income from continuing operation (before taxes)?

Operating Income/operating profit
+ other revenues and gains
- other expenses and losses
____________________________
Inc. from continuing. Operations (before taxes)

13

How do you calculate income from continuing operations Net of Tax?

Income from continuing operations before taxes
- income taxes (current and deferred)
_______________________________
Income from operations (net of tax)

14

NOT

Net of tax

15

How do you calculate net income, starting from income from operations NOT?

Income from operations NOT
+/- discontinued operations NOT
+/- extraordinary gain/loss NOT
________________________
Net income

16

How do you calculate comprehensive income?

Net income
+ other comprehensive income NOT
_____________________
Comprehensive income

17

Freight out

Cost to ship to customer

18

Freight in

Cost to get inventory sent to your business

19

In the multiple step format of the income statement, the SEC requires that public companies place impairment losses in...

Operating income. (Instead of "other expenses and losses"

20

Single step income statement format, 5 items under revenue, 6 items under expenses

Revenues:
Sales.
Interest
Gain on sale of available for sale securities
Equity in investee earnings
Total revenues

Expenses:
COGS
Selling exp.
Administrative exp.
Interest exp.
Loss from permanent impairment of value to facilities
Total expenses
Income from continuing operations before provision for income taxes

21

Unusual or infrequent items definition

Unusual or infrequent event considered to be material

that does not qualify as extraordinary

22

Unusual or infrequent item, placement on income statement or statement of retained earnings

Placed as part of income from continuing operations after normal
Recurring revenues and expenses

23

Discontinued operations, definition

Results from disposal of business component

24

Discontinued operations, placement on income statement or statement of retained earnings

Placed as separate category after income from continuing
operations

25

Extraordinary items, definition

An unusual and infrequent no recurring event, which has material
Effects

26

Extraordinary items, placement on income statement or statement of retained earnings

Placed in separate category after discontinued operations

27

Items that are never extraordinary 3

1 foreign currency devaluation

2 labor strike effects

3 write downs of assets (inventory, PPE, Intangibles, receivables)

28

An extraordinary gain can result from...

Really good insurance

29

Infrequent and unusual items: Restructuring

Program that is planned and controlled by management and
Materially changes scope of business undertaken by company

Or manner which the business is conducted

30

5 common examples of restructuring

1 sale or termination of line of business
2 closure of business activities in particular location
3 relocation of business activities from one location to another
4 changes in management structure
5 fundamental reorganizations that affect nature and focus of
Operations

31

Another unusual or infrequent item is accounting for the costs of...

Exit and disposal activities (includes restructuring)

32

A liability for a cost associated with an exit or disposal activity should be recognized and measured...

Initially at fair value in period where liability is incurred

33

How is fair value usually determined for a liability for a cost associated with an exit or disposal activity?

Determined as present value of estimated future payments
Discounted at credit adjusted, risk free rate of interest

34

In the unusual circumstance when fair value can't be reasonably estimated, the liability shall be initially recognized in period where fair value can be reasonably estimated. 3 examples of these liabilities include...

1 onetime termination benefits provided to current employees
That are involuntarily terminated
2 costs to terminate contract that is not a capital lease
3 costs to consolidate facilities or relocate employees

35

Recognition of the liability and expense for onetime termination benefits depends on whether...

The employees are required to provide services beyond minimum
Retention period

36

If The employees are required to provide services beyond minimum
Retention period, the expense is recognized...

Over the period the services are provided

37

Costs associated with an exit or disposal activity that does not involve discontinued operations shall be included in...

2) the footnotes to the financial statements should provided...

Income from continuing operations before income taxes

2) extensive disclosure of the activities

38

Discontinued operations: to qualify for treatment as discontinued operations, assets must comprise a component of the entity with...

Operations and cashflows that are clearly distinguished,
operationally and for financial reporting purposes, from the
Rest of the entity

39

4 things a component may be?

1 reportable or operating segment
2 reporting unit
3 subsidiary
4 asset group

40

To be reported as discontinued operations 2 requirements must be met

1 the operations and cash flows of the component have been
(Or will be) eliminated from ongoing operations due to disposal

2 entity won't have significant involvement in operations of
Component after disposal

41

Many assets disposed of as discontinued operations are...

Long lived assets

42

The component is classified as discontinued operations in the first period it meets the criteria as...

Being held for sale

43

6 requirements to classify disposed assets in discontinued operations

1 management commits to a plan of disposal
2 assets are available for sale
3 active program to locate buyer has been initiated
4 sale is probable
5 asset is being actively marketed for sale at fair price
6 it is unlikely that disposal plan will significantly change

44

Long lived assets classified as held for sale are reported at the...

Lower of their carrying amounts or fair values less costs to sell

45

The gain or loss on disposal of discontinued operations is the actual gain or loss if the disposal occurs in...

The same period that the component meets the criteria being
Classified as held for sale

46

When discontinued operations are disclosed in a comparative income statement, the income statement presented for each previous year must be...

Adjusted retroactively to enhance comparability with current
Year's income statement

47

Accordingly the revenues, cost of goods sold and operating expenses (including income taxes) for the discontinued component are removed from the revenues, costs of goods sold and operating expenses of continuing operations and are meted into one figure that is...

Income (loss) from discontinued operations

48

Organization of discontinued operation on the income statement

Discontinued operations:
Loss from operations of discontinued division z
Income tax benefit

49

Acronym
I
D
E
NI

Income from continuing operations NOT
Discontinued income from operation NOT
Extraordinary Gain/loss NOT
NI net income

50

2 choices for presenting other comprehensive income

1 at bottom of income statement, continue from net income to
Arrive at a comprehensive income

2 in separate statement, start from net income and directly follows
Statement of income

51

When presenting other comprehensive income at the bottom of the income statement, an entity should present the following 3 items...

1 total amount of net income and its components

2 total amount for other comprehensive income and its components

3 total comprehensive income

52

When presenting other comprehensive income in a separate statement, the entity should present the 2 following items...

1 net income and its components in the statement of net income

2 comprehensive and its components along with
total comprehensive income

53

The accumulated (total) comprehensive income shall be presented...

Separately from retained earnings and additional paid in capital
In the statement of financial position

54

Accumulated comprehensive income:

The changes in the accumulated balances are to be presented in...

The notes of financial statements or on face of financial
Statements

55

Each component of other comprehensive income and reclassifications shall be presented...

Separately

56

Current assets

Cash and other assets/resources commonly identified as those
Reasonably expected to be realized in cash

Or sold or consumed during normal operating cycle of business

57

Current liabilities

Used principally to designate obligations whose liquidation is
Reasonably expected to require the use of existing resources
(Classified as current assets)

Or creation of other current liabilities

58

SHE

Shareholders equity

59

Comprehensive income

Total of net income and other comprehensive income

60

2 approaches for reporting comprehensive income

1 present a combined statement of income with OCI at bottom

2 present a second statement that directly follows income statement

61

Present combined statement of income and comprehensive income with OCI at bottom:

Layout with 7 line items

Sales revenue
COGS
Gross profit
Operating Exp.
Net income
Other comprehensive income
Unrealized holding gain NOT
Comprehensive income

62

What would be the layout of a comprehensive income statement that follows the income statement, in 3 line items?

Net income
Other comprehensive income:
Unrealized holding gain NOT
Comprehensive income

63

How does accumulated other comprehensive income look in the Statement of Stockholder's equity (4 items across and 4 down)

Total. R/E. Acc. Other Common
Comp. Inc. stock

Beg. Balance
Net income
Other comp. Inc:
Unrealized holding gain NOT
End balance

64

Regardless of which approach you choose, you must show the ending balance of accumulated other comprehensive income on...

The balance sheet after retained earnings

65

Examples of other comprehensive income items: 5

1 reclassification adjustments
2 unrealized holding gain/loss AFS securities
3 pension or other post retirement benefit adjustments
4 unrealized G/L on derivatives held as cash flow hedges, foreign
Currency hedges held as cash flow hedges
5 cumulative foreign currency translation adjustment

66

What method is used for cumulative foreign currency translation adjustments?

Current rate method

67

Historical cost/constant $

Increases in prices due to inflation

68

Monetary assets and liabilities, what are they?7

1 cash
2 A/R
3 N/R
4 A/P
5 N/P
6 B/P
7 HTM investments in bonds

69

What do you do with monetary assets and liabilities, when there is an increase in price due to inflation?

Treatment in supplementary info

Net them and calculate a purchasing power gain or loss

70

Purchasing power gain or loss calculation for mon. Asset or mon liability

Treatment in supplementary info

Purchasing power G/L =
Mon asset. [(EOY CPI - BOY CPI)/BOY CPI]
or Mon liability x

71

Treatment in supplementary info: increases in price due to inflation

Nonmonetary assets what are they?

Everything else (so not cash, receivables, payables or bonds)

72

Treatment in supplementary info

What do you do to nonmonetary assets when there is an increase in prices due to inflation?

Convert them

73

Treatment in supplementary info:

Increase in prices due to inflation, what is the conversion factor equation and 2nd step for converting nonmonetary items?

1 Conversion factor =
(Current period CPI/Base Year CPI)

2 conversion factor x nonmonetary item

74

Treatment in supplementary info:

Current cost define

Increases in prices due to demand/market appreciation

75

Treatment in supplementary info:

Current cost, increases in price due to demand/market appreciation, what do you do with monetary assets and liabilities?

Do nothing

76

Treatment in supplementary info:

Current cost, increases in price due to demand/market appreciation, what do you do with nonmonetary items?

Restate current costs and calculate a holding gain/loss

77

Nonmonetary items:

Holding gains/losses for PPE and inventory

Use current cost

Or use recoverable amount if lower than current cost

78

Nonmonetary items:

Holding gains/losses for depreciation exp. And COGS

Use average current cost = (BOY + EOY)/2

79

If $2,450 NOT is being deducted from other comprehensive income as a reclassification adjustment, $2,450 must be the amount of...

Unrealized gains NOT that have been recognized in other
Comprehensive income

80

If a reclassification entry is significant, you must do...

Parenthetical disclosures or footnote disclosures

81

sinking fund

For bond retirement

Accumulates cash to pay B/P

82

Bond issue cost is...

Deferred charge for registering bonds with SEC

83

Classified balance sheet:

Current assets: the layout of cash and bank deposits section
2 line items below

Cash and bank deposits:
Restricted to current bond maturity
Unrestricted

84

Classified balance sheet:

Current assets: inventories (carried at lower cost or market by FIFO) 3 line item layout

Inventories
Finished goods
Work in process
Raw materials

85

Rent revenue collected in advance is classified as...

A current liability

86

Contra account to A/R

Allowance for doubtful accounts

87

Advances to employees are classified as...

A current asset

88

Short term portion of accrued warranty is classified as...

A current liability

89

Classified balance sheet:

Noncurrent liabilities, Notes payable due after 3 years, what is the layout of this on the balance sheet. (1 item below it)

Notes payable due after 3 years. Xxx
Plus unamortized note premium. Xxx. Xxx

90

Classified balance sheet:

Cash surrender value of officers life insurance policies is classified as?

Long term investment

91

Classified balance sheet:

Sinking fund for bond retirement is classified as...

Long term investment

92

Classified balance sheet:

Plant expansion fund is classified as...

Long term investment

93

Classified balance sheet:

What is the layout for leased assets in PPE? (One item below it)

Leased assets. Xxx
Less: acc. Depreciation and amortization (xxx)

94

Classified balance sheet:

3 common examples of line items in the other assets section

1 installment notes due after year 3

2 unamortized bond issue costs

3 equipment to be disposed of

95

Classified balance sheet:

Accrued pension costs would be classified as a...

Noncurrent liability

96

Classified balance sheet:

Convertible preferred stock would be classified in...

Capital stock

97

Classified balance sheet:

6 items included in additional paid in capital

1 from 12% cumulative preferred
2 from common stock
3 from treasury stock transactions
4 from stock dividends
5 from expiration of stock options
6 warrants outstanding

98

Classified balance sheet:

Layout of retained earnings (2 items below retained earnings)

Retained earnings:
Appropriated for bond indebtedness
Free and unappropriated

99

Additional disclosures required for specific situations were specified at...

End of most pronouncements

100

Accounting policies must be set forth as...

The initial footnote to the statements

101

Accounting policies: disclosures are required of... 3 things

1 accounting principles used when alternatives exist

2 principles peculiar to particular industry

3 unusual or innovative applications of accounting principles

102

Subsequent events are those occurring...

After the balance sheet date but before the financial statements
Are issued or available to be issued

103

Financial statements are issued when they are...

Distributed to shareholders and other users

104

Financial statements are available to be issued when they are in a form and format hat is complete and complies with GAAP and all...

Necessary approvals for issuance have been obtained

105

An entity that is an SEC filer or is a conduit bond Obligor for conduit debt securities traded in public market must evaluate subsequent events through date...

2) all other entities must evaluate subsequent events through the date...

Financial statements are issued

2) the financial statements are available to be issued

106

2 types of subsequent events

1 recognized subsequent events

2 nonrecognized subsequent events

107

Recognized subsequent event is one in which...

The condition existed at the balance sheet date

And is recognized on financial statements

108

Examples of recognized subsequent events 3

1 estimate for warranty liability

2 estimate of contingent liability due to lawsuit

3 estimate of allowance for uncollectible accounts

109

If recognized subsequent event is settled after the balance sheet date but before the financial statements are issued or available to be issued, then the settlement amounts should be...

Used as the liability in the balance sheet

110

Nonrecognized subsequent event is one in which the condition...

Did not exist at the balance sheet date,

but arose after the balance sheet date

111

Nonrecognized subsequent events are...

2) however, if the event is such that the financial statements would be misleading, then...

Not recognized in financial statements

2) footnote disclosure should be made indicating nature of event
And estimate of financial statement effects

112

An entity that is an SEC filer is not required to disclose the date through which...

Subsequent events are evaluated

113

Non SEC filers must also disclose the date through which subsequent events were...

Evaluated and whether that date is the date the financial
statements are issued/available to be issued

114

Related party disclosures:

Affiliate

Party is controlled by another enterprise that controls, or is under
Common control with another enterprise

Directly or indirectly

115

Related party disclosures:

Control

Power to direct or cause direction of management through
ownerships contract or other means

116

Related party disclosures:

Immediate family

Family members whom principal owners or management might
Control/influence

Or be controlled or influenced by

117

Related party disclosures:

Managment

Persons responsible for enterprise objectives who have policy-making and decision making authority

118

4 examples of people included in management

1 board of directors
2 CEO and COO
3 Vice Presidents
4 persons without formal titles

119

Related party disclosures:

Principal owners

Owners of more than 10% of firm's voting interests

Includes known beneficial owners

120

Equity method investees

Use equity method of accounting

121

Related party disclosures:

Related parties 6

1 affiliates
2 equity method investees
3 employee benefit trusts
4 principal owners
5 management
6 any party that can significantly influence transaction

122

Related party disclosures:

Financial statements shall include disclosures (footnotes) of material transactions between related parties except: 2

1 compensation agreements, expense allowances and other similar
Items

2 transactions eliminated in preparation of consolidated FS

123

FS

Financial statements

124

Related party disclosures:

Disclosures of material transactions shall include 4

1 nature of relationships
2 description of transaction
3 dollar amounts of transactions
4 amounts due to/from related parties

125

Related party disclosures:

Description of transactions including those assigned...

Zero or nominal amounts

126

Related party disclosures:

Dollar amounts of transactions for each income statement period and effect of...

Any change in method of establishing terms

127

Related party disclosures:

Amounts due to/from related parties, including...

Terms and manner of settlement

128

Related party disclosures:

Representations concerning related party transactions shall not imply that terms were equivalent to those resulting in...

Arms length bargaining unless statement can be substantiated

129

Related party disclosures:

When control relationship exists, disclose...

Such relationship even though no transactions have occurred

130

Writing down inventory is never...

Extraordinary

131

In related party transactions don't disclose officers salaries/expenses unless...

2) Also don't disclose...

They are excessive

2) intercompany sales

132

In related party transactions, loans to officers...

Must be disclosed

133

Disclosure of accounting policies should identify and describe the accounting principles followed by the reporting entity and...

Methods of applying those principles

134

The criteria for determining which investments are treated as cash equivalents is an example of how the entity...

Entity applies accounting principles

135

If fair value option is chose you must use it for...

All similar securities

136

CPI

Consumer price index

137

EOY

BOY

End of year

Beginning of year

138

For valuation approaches level 1 is better than...

Level 2 and level 2 is better than level 3

139

Fair value is the price that would be received to...

Sell an asset or paid to transfer a liability in an orderly transaction
Between market participants

at the measurement date (an exit price)

140

Applying the fair value approach involves:

Identify the asset or...

Liability to be measured

141

Applying the fair value approach involves:

Determine the principal or...

Most advantageous market (highest and best use)

142

Applying the fair value approach involves:

Determine the valuation...

Premise (in use or in exchange)

143

Applying the fair value approach involves:

Determine the appropriate...

Valuation technique (market, income or cost approach)

144

Applying the fair value approach involves:

Obtain inputs for...

Valuation (level 1, level 2, level 3)

145

Fair value approach:

Level 1

Market approach

146

Applying the fair value approach involves:

Calculate the...

Fair value of the asset

147

Fair value approach:

Level 2

Cost approach

148

Fair value approach:

Level 3

Income approach

149

Assume the asset or liability is sold or transferred in either the principal market or most advantageous market:

Principal market has...

Greatest volume and level of activity

150

Assume the asset or liability is sold or transferred in either the principal market or most advantageous market:

Most advantageous market...

Maximizes the price received for the asset or minimizes amount
Paid to transfer the liability

151

Assume the asset or liability is sold or transferred in either the principal market or most advantageous market:

Market participants have the 4 following characteristics

1 independent of reporting entity (not related parties)
2 knowledgeable
3 able to transact
4 willing to transact (motivated, but not compelled to transact)

152

Assume the asset or liability is sold or transferred in either the principal market or most advantageous market:

Do not adjust...

Prices for costs to sell

153

Assume the asset or liability is sold or transferred in either the principal market or most advantageous market:

If location is attribute of asset or liability, price is adjusted for...

Costs necessary to transport asset or liability to market

154

Fair value approach assumes...

Highest and best use of the asset

155

Highest and best use...

Maximizes the value of asset or group of assets

156

Fair value measurement:

Highest and best use must be...3

1 physically possible

2 legally permissible

3 financial feasible at measurement date

157

Fair value measurement:

Highest and best use determines...

The valuation premise used

158

Valuation premise:

In use 2

1 asset provides maximum value by using it with other assets as
A group

2 valuation based on price to sell asset assuming it is used
With other assets

159

In exchange

By itself

160

Valuation premise:

In exchange 2

1 asset provides maximum value on standalone basis

2 valuation based on price to sell the asset standalone

161

Valuation techniques:

Market approach (level 1)

Uses prices and relevant info from market transactions for identical
Or comparable assets or liabilities

162

Valuation techniques:

Income approach (level 3)

Uses present value techniques to discount cash flows or earnings
To present value amounts

163

Valuation techniques:

Cost approach (level 2)

Relies on current replacement cost to replace the asset with
Comparable asset, adjusted for obsolescence

164

Levels of input for valuation:

Use fair value hierarchy to...

Prioritize inputs to valuation techniques

165

Levels of input for valuation:

Fair value hierarchy is...

Level 1, level 2, level 3

166

Levels of input for valuation:

Inputs should be based on...

Lowest level of input (highest priority is lowest level)

167

Levels of input for valuation:

Level 1 inputs (lowest level, highest priority) 2

1 uses quoted prices (unadjusted prices from active markets)

2 examples are quotes from NYSE, quotations from dealer markets

168

Levels of input for valuation:

Level 2 inputs

1 inputs that are directly or indirectly observable other than quoted
Prices of level 1

169

8 Examples of level 2 inputs

1 quoted prices for similar assets or liabilities
2 observable inputs such as yield curves
3 bank prime rates
4 interest rates
5 volatilities
6 loss severities
7 credit risks
8 default rates

170

Levels of input for valuation:

Level 3 inputs, 4 characteristics

1 unobservable inputs
2 may only be used if observable inputs aren't available
3 may reflect reporting entity's own assumption about market
4 based on best information available

171

Change in valuation premise or technique, how should it be treated A?

Treat as change in estimate on prospective basis

172

The fair value option for financial assets and financial liabilities:

Scope applies to:

Financial assets and...

Financial liabilities (includes AFS, held to maturity, equity
investments and liabilities)

173

The fair value option for financial assets and financial liabilities:

Scope applies to:

Firm commitments that...

Involve financial instruments

174

The fair value option for financial assets and financial liabilities:

Scope applies to:

Written loan...

Commitments

175

The fair value option for financial assets and financial liabilities:

Scope applies to:

Nonfinancial insurance contracts that...

Can be settled by paying third party

176

The fair value option for financial assets and financial liabilities:

Scope applies to:

Warranties that can...

Be settled by paying third party

177

The fair value option for financial assets and financial liabilities:

Scope applies to:

Host financial instruments resulting from separation of embedded...

Nonfinancial derivative instrument from a nonfinancial hybrid
Instrument

178

The fair value option for financial assets and liabilities does not apply to...8

1 consolidations
2 pensions
3 share based payments
4 stock options
5 other post employment benefits (OPEB)
6 exit or disposal activity
7 leases
8 financial instruments that are component of equity

179

Fair value, definition

Price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants

At the measurement date

180

Financial asset, definition

Cash, evidence of an ownership interest in an entity or a contract
That conveys a right to receive cash Or another financial instrument

or to exchange other financial instruments on potentially
Favorable items

181

Financial liability, definition

Contract that imposes an obligation to deliver cash or another
Financial instrument

To exchange other financial instruments on potentially unfavorable
Terms

182

Firm commitment, definition

Agreement, usually legally enforceable, that specifies all significant
Terms including quantity, fixed price and timing of transaction

The agreement includes disincentive for nonperformance that
Makes performance probable

183

Fair value option (FVO) 2

1 can elect to measure financial asset or financial liability at
Fair value

2 must elect to use fair value method on specific item

184

Fair value option can be elected on...

Instrument by instrument basis if certain criteria are met

185

Condition to elect fair value option on an instrument by instrument basis:

If multiple advances to one borrower for single contract, fair value options is applied to...

Larger balance and not each individual balance

186

Condition to elect fair value option on an instrument by instrument basis:

If fair value applied to investment that can use equity method, it must be applied to...

All interests in same entity (debt and equity)

187

Condition to elect fair value option on an instrument by instrument basis:

If applied to insurance contracts, must be applied to...

All claims and obligation for that contract

188

Must elect to use fair value method on specific items if...3 situations

1 can be elected on instrument by instrument basis

2 is irrevocable

3 must apply to entire instrument, not portion of instrument

189

Under fair value option, you report unrealized gains and losses in...

Earnings

190

Fair value option:

Classification on statement of cashflows, rules of FAS 95...

Apply

191

Fair value option, election dates:

The date an eligible item is...

First recognized

192

Fair value option, election dates:

The date an entity enters into...

A firm commitment

193

Fair value option, election dates:

When financial assets cease to qualify for fair value treatment due to specialized accounting rules, can elect to use fair value (ex. Equity method investments), therefor going from consolidation to...

Equity method can elect fair value option

194

Fair value option, election dates:

Percentage of ownership change and can...

No longer consolidate

195

Fair value option, election dates:

Modifications of...

Debt

196

For assets and liabilities that are measured at fair value on a recurring basis, the following disclosures are required for each major class of assets and liabilities:

The fair value measurement at the...

End of the reporting date

197

For assets and liabilities that are measured at fair value on a recurring basis, the following disclosures are required for each major class of assets and liabilities:

The level within the fair value hierarchy used, segregating...

The fair value measurements, which use levels 1, 2 and 3 inputs

198

For assets and liabilities that are measured at fair value on a recurring basis, the following disclosures are required for each major class of assets and liabilities:

The amount of any transfers between....

Level 1 and level 2 of fair value hierarchy and reason for transfer
Along with entities transfer policy

199

For assets and liabilities that are measured at fair value on a recurring basis, the following disclosures are required for each major class of assets and liabilities:

Transfers into and out of level 1 and level 2 are disclosed...

Separately

200

For assets and liabilities that are measured at fair value on a recurring basis, the following disclosures are required for each major class of assets and liabilities:

For fair value measures using significant other observable inputs (level 2) and significant unobservable inputs (level 3) a description of...

Valuation techniques is used, the inputs used to determine fair
Values of each class of assets or liabilities

201

For assets and liabilities that are measured at fair value on a recurring basis, the following disclosures are required for each major class of assets and liabilities:

If the is a change in valuation techniques, the...

Reason for the change must be disclosed

202

For fair value measurements using unobservable inputs (level 3) a reconciliation of the beginning and ending balance showing:

Total gains and losses for the period realized and unrealized, presenting gains and losses in...

2) and a description of where those gains or losses are...

Earnings and gains and losses in other comprehensive income

2) included in the income statement or in other comprehensive
Income

203

For fair value measurements using unobservable inputs (level 3) a reconciliation of the beginning and ending balance showing:

What 4 items are shown separately

1 purchases
2 sales
3 issues
4 settlements

204

For assets and liabilities that are measured at fair value on a recurring basis, the following disclosures are required for each major class of assets and liabilities:

For fair value measurements using unobservable inputs (level 3) the amount of total gains or losses for the period included in...

2) and the line item in the statement of...

Earnings from unrealized gains and losses for those assets and liabilities still held at end of period

2) income where gains and losses are recognized

205

For assets and liabilities that are measured at fair value on a recurring basis, the following disclosures are required for each major class of assets and liabilities:

For fair value measurements using unobservable inputs (level 3), a description of...

The valuation processes, the sensitivity of measurement and
The relationships

206

For assets and liabilities that are measured at fair value on a recurring basis, the following disclosures are required for each major class of assets and liabilities:

For fair value measurements, a description of nonfinancial assets with a...

Current use differing from the highest and best use

207

For assets and liabilities that are measured at fair value on a nonrecurring basis, the following information must be disclosed in interim and annual period financial statements:

The fair value measurement at the end...

Of the reporting period and the reasons for measurement

208

For assets and liabilities that are measured at fair value on a nonrecurring basis, the following information must be disclosed in interim and annual period financial statements:

The level within the...

Fair value hierarchy, level 1, 2 and 3

209

For assets and liabilities that are measured at fair value on a nonrecurring basis, the following information must be disclosed in interim and annual period financial statements:

For fair value measurements categorized within level 2 or level 3 of the fair value hierarchy, the...

Inputs and valuation techniques used to measure fair value

210

For assets and liabilities that are measured at fair value on a nonrecurring basis, the following information must be disclosed in interim and annual period financial statements:


For fair value measurements using significant unobservable inputs (level 3) a description of...

Valuation processes

211

Valuation processes

Policies, procedures and analyses of change from period to period

212

For assets and liabilities that are measured at fair value on a nonrecurring basis, the following information must be disclosed in interim and annual period financial statements:

For fair value measurement a description of nonfinancial assets with...

A current use differing from the highest and best use

213

Report info about changing prices in...

Unaudited info, which is supplementary info

214

8Ks provide info on...

Material events

215

ABS

Asset backed securities

216

Regulation FD Disclosure

Everyone receives same information at same time

217

Large accelerated filer has a market cap...

Over $700 million

218

Accelerated filer has market cap...

2) all other filers have makes caps...

Over $75 million but under $700 million

2) under $75 million

219

Form S-1

Registration statement

220

OCBOA

Other comprehensive bases of accounting

221

Other comprehensive bases of accounting:

Financial statements may be prepared in conformity with a comprehensive basis of accounting other than...

GAAP or IFRS

222

4 types of Other comprehensive bases of accounting (OCBOA)

1 cash basis financial statements
2 modified cash basis FS
3 tax basis FS
4 regulatory basis FS

223

Cash basis financial statements

In pure cash basis financial statements the only asset is cash,
Revenue is recognized when cash is received

Expenses are recognized when cash is paid

224

The pure basis of cash accounting is...

Rarely used

225

Modified cash basis financial statements, define

with example of what's usually recorded in modified cash basis financial statements

Cash basis statements with modifications that have substantial
Support

Ex. Fixed assets, inventories and related liabilities are typically
Recorded in modified cash basis financial statements

226

Modified cash basis financial statements:

Modifications that have substantial support involve presenting items as they would be in...

GAAP financial statements providing that the presentation is not
Illogical

227

Modified cash basis financial statements:

As an example, an illogical modification would involve...

Recording inventories but not recording the accounts payable
Related to the inventories

228

Tax basis financial statements: define

Statements prepared on basis of tax laws and regulations

229

Tax basis financial statements:

When financial statements are prepared on an income tax basis, the financial statements should not...

Simply repeat items and amounts reported in the tax return

230

Tax basis financial statements:

What 2 items should be fully reflected in a tax basis income statement?

1 nontaxable municipal interest

2 nondeductible portion of travel and entertainment expense

231

Regulatory basis financial statements

Regulatory financial statements are prepared based on rules
Established by a regulatory agency

232

OCBOA financial statements should not included titles such as...

Balance sheet and statement of income, because they are reserved
For GAAP basis statements

233

OCBOA:

notes of financial statements should disclose...

Differences between OCBOA and GAAP basis financial statements
As well as other info normally included in GAAP FS

234

The liquidation basis of accounting is to be used when liquidation is...

Imminent

235

Liquidation is imminent

2) and if either of the following 2 conditions exist

Remote likelihood the entity will return from liquidation

2) a) approved liquidation plan with remote likelihood of being
Blocked
B) outside force imposed plan

236

Liquidation basis of accounting: measurement

Assets are to be presented at...

2) assets should include...

The amounts reflecting expected cash proceeds

2) sellable items not previously recognized under US GAAP
(Ex trademarks)

237

Liquidation basis of accounting: measurement

Liabilities are to be presented using...

Current US GAAP guidance

238

Liquidation basis of accounting: measurement

Accrue expected liquidation...

Period costs and income

239

Liquidation basis of accounting:

Disclosure 4

1 plan of liquidation
2 measurement methods and assumptions
3 expected liquidation period costs and income
4 expected liquidation time frame

240

SEC reporting requirements:

Unless exempt by regulation, companies with what 3 characteristics must have their securities registered?

1 Assets of more than $10 million
2 over 500 shareholders
3 securities that trade on national stock exchange or over the
counter market

241

Termed issuers

Companies with registered securities

242

Companies with registered securities (termed issuers) must...

Follow SEC rules and regulations

243

4 major securities regulations

1 regulation S-X
2 regulation S-K
3 regulation AB
4 regulation Fair disclosure (Reg FD)

244

Regulation S-X

Describes the form and content of financial statements filed
With the SEC

245

Regulation S-K

Describes the requirements for information and forms required
By regulation S-X

246

Regulation AB

Describes reporting requirements for asset backed securities

247

Regulation Fair Disclosure (Reg FD)

Mandates that publicly traded companies disclose material
information to all investors simultaneously

248

Companies with registered securities (termed issuers) must file the following 5 reports with the SEC

1 Form S-1/F-1
2 Form 8-K/6-K
3 Form 10-K/20F
4 Form 10-Q
5 Schedule 14A

249

Form S-1/F-1

Registration statement for US/foreign companies

250

Form 8-K/6-K

Information about material events for US/foreign companies

251

Form 10-K/20-F

Annual report for US/foreign company

252

A foreign registrant can omit reconciliation between US GAAP and home country GAAP if the...

Foreign based company follows IFRS as issued by IASB

253

Form 10-Q

Quarterly reports

254

Schedule 14-A

Proxy statement

255

Information statements (Form 8-K), provide information about material events that affect the company including...4

1 mergers and acquisitions
2 changes in directors or CEO
3 major changes in operations or status
4 changes in auditors

256

Form 8-K must be filed within...

4 business days of occurrence of events

257

How many 10 Qs does the company file each year? Why?

3, because 10-K contains 4th quarter

258

When are form 10-Qs due for large accelerated filers?
Accelerated filers? Everyone else?

40 days after end of fiscal quarter for large accelerated and
accelerated filers

45 days after end of fiscal quarter for all other filers

259

When are 10-Ks due for large accelerated filers? Accelerated filers?
All other filers?

Due 60 days after end of fiscal year for large accelerated filers

Due 75 days after end of fiscal year for accelerated filers

Due 90 days after end of fiscal year for all other companies

260

SEC releases administrative interpretations:

Accounting and auditing enforcement releases (AAERs)

Announce enforcement actions of the SEC's reporting and
disclosure requirements

261

SEC releases administrative interpretations:

Accounting Series Releases (ASRs) issued from 1937-1982

Are predecessor or financial reporting releases

ASRs still in effect are codified

262

SEC releases administrative interpretations:

Financial Reporting Releases (FRRs)

Update the SEC codification of financial reporting policies
And Regulations S-K and S-X

263

SEC releases administrative interpretations:

Staff Accounting Bulletins (SABs)

Unofficial interpretations relating to accounting and disclosure
Practices

SEC staff follow SABs when administering disclosure requirements

264

SEC releases administrative interpretations:

Staff Legal Bulletins

Summarize the Commission staff's views related to SEC regulations
And federal securities laws

265

SEC releases administrative interpretations:

Staff no-action, Interpretive, and Exemptive letters, are published SEC Staff responses to...

Interpretation inquiries

266

SEC releases administrative interpretations:

3 that are not legally binding

1 Staff Accounting Bulletins (SABs)

2 Staff Legal Bulletins

3 Staff no-action, interpretive and Exemptive letters

267

SEC releases administrative interpretations:

3 releases that are legally binding

1 Accounting and Auditing Enforcement Releases (AAERs)

2 Accounting Series Releases (ASRs)

3 Financial Reporting Releases (FRRs)

268

Financial Statements of Trusts:

Trusts are entities formed to...

Hold assets for the benefit of beneficiaries

269

Trusts are administered by...

Trustees

270

Trusts generally present the following 3 financial statements

1 statement of assets and liabilities

2 statement of operations

3 statement of changes in net assets

271

Financial statements of a trust are generally presented...

2) and the assets are generally presented at...

On the accrual basis

2) at their fair values