Deck 2 Flashcards
(28 cards)
When is disclosure of significant estimates required?
When it is REASONABKY POSSIBLE that the estimate will change and the effect will be MATERIAL
NOTE: summary of significant accounting policies is important
Important I say
Does GAAP require disclosure of compliance with GAAP?
Nope.
IFRS requires disclosure of estimates and:
Judgments made in preparation of financial statements
Vulnerability to a concentration disclosure requirements:
- Concentration exists as of financial statement date
- Concentration makes the entity vulnerable to risk of a near-term severe impact
- It is at least REASONABLY POSSIBLE that the events that could cause a sever impact from the vulnerability will occur in the near term
Summary of significant accounting policies includes disclosure of:
- Measurement bases used in preparing financial statements
- Specific accounting principles and methods used during the period Including:
Basis of consolidation
Depreciation methods
Amortization of intangibles
Inventory pricing
Use of estimates
Fiscal year definition
Special revenue recognition issues
Disclosure requirements IFRS requires but GAAP does not
Unreserved statement of compliance with IFRS and disclosure of judgments (as well as estimates) management has made in the process of applying accounting policies which have a significant effect on the financial statements
According to GAAP, doubt about an entity’s ability to continue as a going concern is evaluated for:
A reasonable period of time not to exceed one year beyond the date the financial statements are issued
Going concern is important to IFRS because:
It is the only fundamental assumption in IFRS (GAAP has several fundamental assumptions)
The evaluation of going concern status is performed by:
Management, in both IFRS and GAAP
A balance sheet is prepared under the liquidation basis of accounting when:
The entity’s liquidation is eminent
Substantial doubt about an entity’s ability to continue as a going concern exists when:
It is PROBABLE that the entity will not be able to meet its obligations as they come due within ONE YEAR from the date the financial statements are issued
Consideration should be given to an entity’s plans to mitigate conditions or events that give rise to substantial doubts about its ability to continue as a going concern only if these two factors are present
- it is PROBABLE that the plans will be effectively implemented, and
- it is PROBABLE that the implemented plans will be successful in mitigating the adverse conditions or events
Under IFRS, disclosure regarding substantial doubt about an entity’s ability to continue as a going concern is required when:
Management is aware of material uncertainties that may give rise to substantial doubt about the entity’s ability to continue as a going concern
According to IFRS, doubt about an entity’s ability to continue as a going concern is evaluated for:
At least one year from the balance sheet date
What is required for a reasonably possible loss?
Footnote disclosure
Note: if an event occurred after the balance sheet date but before issuance, disclosure is still required
Just a note for ya
Financial statements are “available to be issued” when:
- Financial statements are in a form and format that comply with GAAP
- All approvals necessary for the issuance of the financial statements have been received
Financial statements are considered to be “issued” when:
- Financial statements are in a format that comply with GAAP, and
- Financial statements have been widely distributed to financial statement users
Which entities are required to disclose the subsequent event evaluation period end?
Non-filers - those who do not file financial statements with the SEC.
This makes sense because non-filers May hang on to their statements for weeks or months before needing to issue them to a user (a bank, etc.) and those users would need to know up until which date subsequent events were evaluated.
With filers, it’s obvious, because they can’t evaluate anything after the statements are issued, and because they are publicly issued, that date is very clear.
Fair value includes ____________ costs but not _____________ costs
Transportation; transaction
Fair value is a(n) ___________ price
Exit price: the price to sell an asset or transfer a liability, NOT acquire or assume it
Level 1 inputs
Quotes prices in active markets for identical assets or liabilities
Level 2 inputs
Quoted prices in active markets for similar assets and liabilities
OR
Quoted prices in inactive markets for identical assets and liabilities
