F2

Question 1

Where would an explanation of a company’s revenue recognition policy be located in the financials?

Answer 1

Notes, summary of significant accounting policies disclosure.

Question 2

In general, what kind of information should be disclosed in the summary of significant accounting policies?

Answer 2

Treatment in management’s financial statements of certain items, methods, estimates, etc.

Question 3

Management is required to evaluate whether an entity will be able to continue as a going concern for how long?

Answer 3

A reasonable period of time no longer than one year after the FS are ISSUED.

Question 4

What is a major difference between GAAP & IFRS regarding going concern?

Answer 4

IFRS does not offer guidance on the liquidation basis of accounting, while GAAP does.

Question 5

If an entity has a substantial doubt about it’s ability to continue as a going concern, the FS should be prepared using what basis of accounting?

Answer 5

Liquidation basis.

Question 6

Under IFRS, if an entity does not have plans to mitigate the substantial doubt of ability to continue as a going concern, the FS should be prepared under what basis of accounting?

Answer 6

NOT the liquidation basis (GAAP only). IFRS does not specify which basis to use.

Question 7

Under IFRS, when is disclosure required regarding substantial doubt of an entities ability to continue as a going concern?

Answer 7

When management is aware of material uncertainties that give rise to the doubt.

Question 8

Do you agree with this statement?

Management is required to evaluate if substantial doubt about ability to continue as a going concern within one year of the balance sheet date.

Answer 8

NO. Issued date, not balance sheet date.

Question 9

If management’s plan to mitigate substantial doubt make the doubt alleviated, do you need a disclosure still under IFRS?

Answer 9

YES.

Question 10

What is a type 1 subsequent event? What is the treatment?

Answer 10

Recognized sub. event. Happened during period but discovered later. Record JE & disclosure.

Question 11

What is a type 2 subsequent event? What is the treatment?

Answer 11

Unrecognized sub. event. Happened after the period and discovered after. Disclosure only.

Question 12

How long should public companies evaluate subsequent events?

Answer 12

Through the date the FS are issued.

Question 13

How long should private companies evaluate subsequent events?

Answer 13

Through the date the FS are available to be issued.

Question 14

What does “recognition” mean in terms of subsequent events.

Answer 14

Booking a JE, happened during the period and discovered later, must accrue.

Question 15

For fair value, which level is most reliable - level 1 or level 3?

Answer 15

Level 1 - quoted prices in active markets for identical assets/liabilities.

Question 16

FV includes what kind of costs?

Answer 16

Transportation costs, but not transaction costs.

Question 17

When there is no principal market, what price should be considered FV?

Answer 17

The price in the most advantageous market.

$price - Costs = Highest price possible

Question 18

For FV, what is a level 3 input?

Answer 18

Unobservable input, based on entity’s assumptions of DCF.

Question 19

What is a principal market regarding FV?

Answer 19

The market with the highest volume.

Question 20

What does “most advantageous market” mean?

Answer 20

After transaction costs, which quoted price is the highest? That is the most advantageous, and you would take only the quoted price as the FV. But you need to back out transaction costs to determine the most advantageous.

Question 21

The FV of a non financial asset (land) is the value at:

Answer 21

It’s highest value and best use. FV is highest price available to get for land.

Question 22

What level of input & valuation technique would require a discount rate regarding FV?

Answer 22

Level 3, income approach.

Question 23

What are level 2 inputs?

Answer 23

Similar assets/liabs in active markets, or identical assets in inactive markets.

Question 24

What is the 10% test regarding segment reporting?

Answer 24

If segment is 10% or more of any of the following:

1. ) Revenue (include IC)
2. ) Profit/Loss
3. ) Assets

Question 25

According to revenue only, which of the following must be considered to determine which segments need to be reported? 1. ) Sales to unaffiliated customers 2. ) IC sales

Answer 25

Both. Total revenues including IC revs.

Question 26

Which of the following would meet the test for segment reporting? Co. A = ($200,000) Co. B = $60,000 Co. C = $1,140,000

Answer 26

Co. A & Co. C. A segment meets the size test if the absolute amount is 10% or greater. Even if one is a loss.

Question 27

If any customer accounts for over what % of the revenue should an entity disclose it as a major customer?

Answer 27

10% or more.

Question 28

What is the 75% test in segment reporting?

Answer 28

Reporting sufficiency test, all reported segments = 75% or more of total. Based on external revenue.

Question 29

IFRS requires disclosure of which FS element that GAAP does not regarding segment reporting?

Answer 29

Segment Liabilities.

Question 30

Can you name the required disclosures for public companies regarding segment reporting?

Answer 30

1. ) Operating segments 2. ) Products/services 3. ) Geo areas 4. ) Major customers (concentrations)

Question 31

If one segments is greater than which % does it take for segment reporting to not be necessary?

Answer 31

90%

Question 32

For interim reporting purposes, what costs should be allocated equally among Q's?

Answer 32

Costs that benefit each Q. Ex: Payroll taxes paid in Q1 benefit entire calendar year.

Question 33

If an entity sold a piece of equipment in Q3, what amount should be reported in Q3 interim FS?

Answer 33

The full amount. G/L from sale of FA s/b reporting during period incurred.

Question 34

Loss on a sale of a component of the business should be reported: a. ) In the period incurred b. ) Evenly for all periods that benefit/lose

Answer 34

a.) In the period incurred.

Question 35

What form is required to be reported annually with the SEC? Quarterly?

Answer 35

10K & 10Q.

Question 36

What is the threshold to be considered a large accelerated filer with the SEC?

Answer 36

$700 mil. and over.

Question 37

What is the threshold to be considered an accelerated filer with the SEC?

Answer 37

$75m - $700 mil.

Question 38

What is form 20-F?

Answer 38

Non-U.S (10k) annual report.

Question 39

What is form 11k?

Answer 39

Employee benefit plans.

Question 40

What is form 40-F?

Answer 40

Canadian annual report.

Question 41

What is form 6-K?

Answer 41

Semi-annual report for foreign private issuers (unaudited)

Question 42

What is form 8-K?

Answer 42

For major events.

Question 43

What are forms 3, 4, & 5?

Answer 43

For 10% or more owners.

Question 44

Under IFRS & GAAP annual reporting requirements, how many income statements does each require?

Answer 44

``` GAAP = 3 IFRS = 2 ```

Question 45

What does XBRL stand for and what is it?

Answer 45

eXtensible Business Reporting Language. Links FS data into machine readable code.

Question 46

What is taxonomy?

Answer 46

Specific links used for individual items.

Question 47

What major disclosure may be omitted in form 10-Q?

Answer 47

Summary of significant accounting policies.

Question 48

Which report requires subsequent events disclosure? a. ) 10-K b. ) 10-Q

Answer 48

Both.

Question 49

What are they different kinds of ratios?

Answer 49

1. ) Liquidity 2. ) Activity 3. ) Profitability 4. ) Coverage

Question 50

To determine the "reporting sufficiency test" in segment reporting, what is included in the determination?

Answer 50

Requires that all reportable segments (looking at EXTERNAL sales only) have at least 75% of the total external sales.

Question 51

IFRS determines reportable segments a little differently from GAAP, what is the main difference?

Answer 51

IFRS also looks at segment liabilities.

Question 52

Within how many days after the end of the period is a large accelerated filer required to file Form 10-Q? What about 10-K?

Answer 52

``` 10-Q = 40 days 10-K = 60 days ```

Question 53

Within how many days after the end of the period is an accelerated filer required to file Form 10-Q? What about 10-K?

Answer 53

``` 10-Q = 40 days 10-K = 75 days ```

Question 54

Within how many days after the end of the period are all other filers (not large or accelerated) required to file Form 10-Q? What about 10-K?

Answer 54

``` 10-Q = 45 days 10-K = 90 days ```

Question 55

Is fair value an exit or entrance price? Meaning, is it the amount you can buy an asset at? Or sell an asset at?

Answer 55

Exit price - how much you can sell an asset for.

Question 56

GAAP requires that estimates made in the FS be disclosed in the notes, and so does IFRS. What is something else that IFRS requires in the notes, but GAAP does not?

Answer 56

1. ) Judgements made (ex: classifying an investment as held to maturity vs. held for sale) 2. ) Statement of compliance with applicable accounting policies

Question 57

Does IFRS offer guidance on the liquidation basis of accounting when there is substantial doubt about an entity's ability to continue as a going concern?

Answer 57

No - only GAAP offers guidance on the liquidation basis of accounting. IFRS does not specify the basis of accounting to be used when the doubt exists.

Question 58

Under IFRS, when is disclosure required for substantial doubt of going concern? What about GAAP?

Answer 58

IFRS: when management is aware of material uncertainties that may give rise to the doubt of the ability to continue as a going concern GAAP: when it is probable the entity cannot continue within one year of issuance of the FS

Question 59

When must an issuer evaluate subsequent events through? What about a nonissuer?

Answer 59

Nonissuer - evaluate sub. events until FS ready to be issued Issuer - evaluate sub. events until FS are issued

Question 60

What should be included in the disclosure of the FS for an issuer about the date which subsequent events have been evaluated through?

Answer 60

Trick question - issuers do not disclose the date through which sub. events were evaluated (which would be the date the FS are issued) Nonissuers, however, are required to disclose the date through which sub. events were evaluated (which would be the date the FS are available to be issued)

Question 61

What is the difference between an exit and entrance price?

Answer 61

Price to buy vs. sell something. PP&E - entrance = historical cost Exit = Fair value

Question 62

A change from a level 1 input to a level 2 input would be considered what kind of change?

Answer 62

Change in estimate. A change in the valuation technique would be considered a change in estimate. Change in valuation technique would fall into the category of a change in accounting estimate.

Question 63

How do you determine the principle market for a product?

Answer 63

The market with the greatest volume. *not to be confused with the calculation of accounting for transaction costs and product price to determine the most advantageous market. You do that when there is no principal market. But if the question asks you to identify the principal market, then its the one with the greatest volume

Question 64

What are some common modifications to prepare modified cash basis FS?

Answer 64

- Capitalizing inventory - Accrual for income taxes - Recognizing LT debt *Recording revenues when earned would not be a common modification, as this would make the FS accrual based