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Flashcards in Balance Sheet Deck (10):
1

Which of the following information should be disclosed in the summary of significant accounting policies?

  • Adequacy of pension plan assets relative to vested benefits.
  • Criteria for determining which investments are treated as cash equivalents.
  • Refinancing of debt subsequent to the balance sheet date.
  • Guarantees of indebtedness of others.

Criteria for determining which investments are treated as cash equivalents.

The method for determining which assets are considered to be cash equivalents is a significant accounting policy.

 

2

What is the purpose of information presented in notes to the financial statements?

To provide disclosures required by GAAP

3

Which of the following should be disclosed in a summary of significant accounting policies?

  • Future minimum lease payments in the aggregate and for each of the five succeeding fiscal years.
  • Composition of sales by segment.
  • Depreciation expense.
  • Basis of profit recognition on long-term construction contracts.

 

Basis of profit recongnition on long-term construction contracts.

The summary of significant accounting policies should disclose policies.

The "basis" of profit recognition on long-term construction contracts is a policy.

4

Which of the following must be included in a company's summary of significant accounting policies in the notes to the financial statements?

  • Schedule of fixed assets.
  • Description of current year equity transactions.
  • Summary of long-term debt outstanding.
  • Revenue recognition policies.

Revenue recognition policies

Summary of significant accounting policies includes "policies"

5

What should be included in the 

Related Party Disclosures?

Transactiosn outside the ordinary course of business

Example:

  • Loans to officers
  • Intercompay Sales

For consolidated financial statements, add intercompany totals of the above

6

What items are required to be disclosed in 

Related Party Transactions?

  1. The amount due to the affiliate at balance sheet date
  2. The dollar amount of the purchases during the year

 

If unsure, disclose the most rather than the least.

7

Under GAAP, what Related Party transactions require disclosures?

Transactions outside the normal course of business, assuming the amounts are material.

8

What disclosure is needed for an entity with an equity method investment?

The company's accounting policy for the investment

Equity Method is a "Significant Influence" (20-50%) and needs to be disclosed.

9

Under IFRS, what Related Party transactions require disclosures?

Loans to officers and key management compensation:

Consolidated officers' salaries

Consoliated loans to officers

 

10

What are the disclosure requirements regarding Risks and Uncertainties?

  1. Nature of operations
  2. Use of estimates in preparation of F/S
  3. Certain significant estimates
  4. Concentration vulnerability

Effects must be material

Immaterial effects are not disclosed.