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Fin > F2 > Flashcards

F2 Flashcards

1
Q

Info presented in notes to the FS have the purpose of:

A

providing disclosures required by GAAP

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2
Q

The summary of significant accounting policies should disclose:

A

polices such as:

basis of profit recognition on long-term construction contracts (revenue recognition)

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3
Q

disclosure of ______ is an integral part of the FS

A

accounting polices and all other disclosures

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4
Q

For disclosure of accounting policies, the format and location of accounting policies are not fixed by:

A

GAAP

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5
Q

Accounting policy disclosures are normally Note 1, but that is a reasonable and very general practice and not a rule of:

A

GAAP

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6
Q

For disclosure of accounting policies, disclosure should not be limited to principles and methods peculiar to the industry in which the company operates. __________ should be disclosed

A

All material accounting policies

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7
Q

Significant estimates should be disclosed when it is ________ not _____ that the estimate will change in the near term and that the effect of the change will be ______. ______ items are not disclosed.

A

reasonably possible, probable. material, immaterial

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8
Q

examples of disclosure requirements related to risks and uncertainties under US GAAP?

A
  • disclosure of the use of estimates in the prep of the FS
  • disclosure of an entity’s major products or services and its principle markets
  • disclosure of concentrations when it is reasonably possible that a concentration could cause a severe impact in the near term
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9
Q

The summary of significant accounting policies is typically the first note provided after the FS and will include components such as:

A
  • measurement bases,
  • accounting principles and
  • methods, criteria, and policies such as basis of consolidation, depreciation methods, revenue recognition, etc.
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10
Q

Plant asset composition will be described in a specific note related to:

A

PPE

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11
Q

Concentration of credit risk relating to financial instruments will be described in a specific note related to:

A

financial instruments

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12
Q

The method of determining which assets are considered to be cash equivalents is a:

A

significant accounting policy

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13
Q

computing depreciation principally by the straight-line method is a GAAP method of depreciation that should be described in the:

A

summary of significant accounting policies

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14
Q

Disclosing the sale of a component of a business is required:

A

in FS footnotes

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15
Q

required disclosures under IFRS but not under US GAAP:

A
  • statement of compliance with IFRS

- disclosure of judgements made (whether a financial asset is categorized as held to maturity or available for sale)

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16
Q

required disclosures under both IFRS and GAAP:

A
  • disclosure of all significant accounting policies

- disclosure of estimates made in prep of FS

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17
Q

required disclosures under GAAP:

A
  • disclosure of all significant accounting policies

- disclosure of estimates made in prep of FS

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18
Q

required disclosures under IFRS:

A
  • disclosure of all significant accounting policies
  • disclosure of estimates made in prep of FS
  • statement of compliance with IFRS
  • disclosure of judgements made (whether a financial asset is categorized as held to maturity or available for sale)
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19
Q

qualitative assessments that could be included in mangagement discussion and analysis:

A
  • an analysis of the company’s major competitors
  • a projection of future market conditions
  • management’s estimate of sales for upcoming year
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20
Q

mangagement discussion and analysis goes after:

A

FS and footnotes in form 10-K required to be filed by publicly held corporations with the SEC

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21
Q

Disclosure of vulnerability to concentration is required if all of the following criteria are met:

A
  • the concentration exists as of the FS date
  • the concentration makes the entity vulnerable to the risk of a near term severe impact
  • it is at least reasonably possible that the events that could cause a severe impact from the vulnerability will occur in the near term
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22
Q

concentrations in the volume of business translated with a particular customer should be:

A

disclosed in notes

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23
Q

an entity is considered to be a going concern if it is reasonably expected to:

A

remain in existence and to be able to settle all its obligations for the foreseeable future.

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24
Q

Management is required to evaluate whether there is substantial doubt about an entity’s ability to continue within one year after:

A

the date that the FS are issued

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25
Q

Going concern is one of several fundamental assumptions in _____. It is the only fundamental assumption in ________.

A

GAAP, IFRS

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26
Q

_____ provides specific guidance about preparing FS and necessary disclosures when liquidation is imminent. _____ doesn’t offer guidance on the basis of accounting to use in case of imminent liquidation.

A

GAAP, IFRS

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27
Q

Both IFRS and US GAAP require the evaluation of going concern status be performed by:

A

management

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28
Q

Both IFRS and US GAAP require relevant disclosures when there is doubt about:

A

an entity’s status as a going concern

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29
Q

Management believes that plans will be effectively implemented and successful in mitigating the adverse conditions (going concern). How should FS be prepared?

A

under the going concern assumption basis of accounting with footnote disclosure explaining the conditions that originally raised doubt about entity’s status as a going concern

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30
Q

The only time a BS is required under the liquidation basis of accounting is when:

A

the entity’s liquidation is imminent. (not a going concern)

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31
Q

Consideration should be given to an entity’s plans to mitigate the conditions or events that raise substantial doubt about it’s ability to continue as a going concern only if:

A
  • if 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
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32
Q

Under IFRS, disclosure is required when _______________________ about the entity’s ability to continue as a going concern

A

management is aware of material uncertainties that may give rise to substantial doubt

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33
Q

Under GAAP, disclosure is required when _______________________ about the entity’s ability to continue as a going concern

A

there is substantial doubt (even if doubt is alleviated by management’s plans to address it)

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34
Q

____________ is required for a reasonably possible loss.

A

Only footnote disclosure

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35
Q

The nature of the contingency should be disclosed as well as the nature of the possible loss or range of loss. If insurance appears to be available for the entire loss except the deductible portion, _____ needs to be included in the footnote

A

deductible portion of loss

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36
Q

Even though event occurred after the date of the FS disclosure is still required since:

A

statements haven’t been issued

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37
Q

The entirety of the event occurred after balance sheet date, so there is no need to:

A

record JE

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38
Q

FS have not been issued and the actual amount of financial settlement is known. The amount should be:

A

included in year end FS and disclosed as a subsequent event

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39
Q

For entities that don’t file FS with the SEC, the subsequent event evaluation period runs through the date the FS are available to be issued, and that date is defined as:

A

the date when FS are in a form and format that comply with GAAP and by which all approvals for issuance have been obtained (not necessary that the FS have actually been issued)

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40
Q

For entities that file FS with the SEC, the subsequent event evaluation period runs through the date the FS are issued. FS are considered to be issued on the date when:

A

FS are in a form and format that comply with GAAP and by which the FS have been widely distributed to FS users

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41
Q

The subsequent event evaluation for a filer with the SEC is:

A

through the date that its FS are issued

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42
Q

The subsequent event evaluation for a nonfiler with the SEC is:

A

through the date that the FS are available to be issued

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43
Q

__________ are not required to disclose the date through which subsequent events have been evaluated

A

entities that file FS with SEC

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44
Q

__________ are required to disclose the date through which subsequent events have been evaluated and whether:

A

entities that don’t file with SEC, that date is the date that the FS were issued or the date or FS were available to be issued

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45
Q

if the resulting liability is larger than the liability originally recorded, there would be a detrimental effect on the company’s debt to equity ratio, how?

A

debt would be higher and equity lower

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46
Q

An entity should not recogize subsequent events in the FS that provide info about events that:

A

didn’t exist at the FS date

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47
Q

Fair value is a ______ measure

A

market-specific

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48
Q

Fair value is an exit price which is:

A

the price to sell an asset or transfer a liability

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49
Q

Fair value includes ____ costs but not _____ costs

A

transportation costs, transaction costs

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50
Q

The price in the principal market for an asset or liability will be the:

A

fair value measurement

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51
Q

Level ____ inputs are the most reliable Fair value measurements and Level ___ inputs are the least reliable

A

1, 3

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52
Q

Level 1 measurements are quoted prices in active markets for:

A

identical assets or liabilities only (most reliable)

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53
Q

Level 2 measurements are quoted prices in active markets for:

A

similar assets or liabilities

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54
Q

When there is no principal market, the price in the most advantageous market is:

A

the fair value measurement

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55
Q

although transaction costs are not included in the fair value measurement, they are used to determine the most advantageous market as follows:

A

net price = quoted price - transaction costs

if the net price is the highest it is the most advantageous market and chosen quoted price as the fair value of the asset

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56
Q

if Market A were the _______ market for the asset, then this would be the fair value of the asset. However, because there is _______ market, the price in the most advantageous market is the price of the asset

A

principal, no principal

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57
Q

a change in the valuation technique used to measure fair value is a change in:

A

estimate (per SFAS No 157)

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58
Q

Both __________ are acceptable methods of measuring fair value

A

market approach

cost approach

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59
Q

discounted cash flow of operations is considered to be a Level:

A

3 input (least reliable)

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60
Q

the historical performance and return on investment are considered to be level:

A

3 unobservable inputs (least reliable)

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61
Q

projected cash flows are an unobservable input based on entity assumptions and would be classified as a:

A

level 3 input

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62
Q

quoted stock prices in active stock markets are level:

A

1 inputs

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63
Q

if the net price is the highest, it is the most advantageous market and the ______ is chosen as the fair value of the asset

A

quoted price

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64
Q

Fair value is:

A

the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market at the measurement date under market conditions

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65
Q

Fair value is an exit price, not an entrance price (____ an asset, not ____ an asset)

A

sell, acquire

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66
Q

quoted prices for identical assets and liabilities in markets that are not active are level:

A

2 inputs

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67
Q

internally generated cash flow projections for a related asset or liability would be classified as Level 3 because:

A

it is based on unobservable inputs reflecting a company’s own assumptions about the way the related asset of liability would be priced

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68
Q

interest rates that are observable at commonly quoted intervals are level:

A

2 observable input

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69
Q

Level ___ inputs are unadjusted quoted prices for identical assets or liabilities in active markets

A

1

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70
Q

inputs that are principally derived from or corroborated by observable market data are examples of:

A

level 2 inputs

71
Q

inputs based on the reporting entity’s internal data are examples of:

A

level 3 inputs

72
Q

The principal market is the market with:

A

the greatest volume of activity for the particulate asset for which fair value is being determined

73
Q

Because the exchange had the greatest volume of purchases in total, the exchange is the:

A

principal market

74
Q

the fair value of a non financial asset is the value at its:

A

highest and best use

75
Q

because it rarely buys the commodity in question, the market would be considered:

A

inactive market

76
Q

Fair value measurement should include all the assumptions that a market participant would make including:

A
  • info about restrictions

- assumptions about risk

77
Q

A company may apply fair value to financial instruments on an __________, but once elected, fair value measurement will be used until the asset/liability is disposed

A

instrument by instrument basis

78
Q

a reportable operating segment is one having:

A

10% of all revenue, including revenue from unaffiliated sales and inter-segment sales

79
Q

what should a public company present about revenues from its reporting segments?

A

unaffiliated sales and inter-segment sales disclosed separately

80
Q

operating profit by segments is based on the measure of profit reported to the chief operating decision maker. what is included? what is not included?

A

not included: equity in net income of another company, interest expense, income taxes, general corporate expenses, and gains or losses on discontinued operations (not allocated to divisions)

they may be allocated if that is how the segments report to the chief operating decision maker (traceable)

81
Q

sales to other segments would be used in determining:

A

a segment’s operating income

82
Q

in order to conform to GAAP, financial statements for public business enterprises must report segment info about a company’s major customers if:

A

that customer provides 10% or more of the combined revenue, internal and external, of all operating segments

83
Q

For each reportable segment of an enterprise, both _______ should be disclosed under US GAAP

A

profit or loss, total assets

in disclosure questions, if you are not sure, disclose the most

84
Q

For segment reporting under GAAP, if an identified segment’s _____ constitute more than 10% of the combined ______ of all operating segments, the segment should be reported. The same rule doesn’t apply for:

A

assets, assets, liabilities

85
Q

______ are required to report on business segments

A

only publicly traded enterprises

86
Q

if division revenues account for more than 75% of total sales to unaffiliated customers (external sales) then:

A

no additional reportable segments need to be identified

87
Q

The 10% size test is the qualitative threshold for reportable segments. Any of the three criteria are applicable:

A
  1. reported revenue greater than or equal to 10% of combined revenue of all operating segments
  2. reported profit/loss greater than or equal to 10% of the greater (absolute value) of:
    - combined profit of all operating segments that did not report a loss
    - combined reported loss of all operating segments that did report a loss
  3. assets greater than or equal to 10% of the combined assets of all operating segments
88
Q

company determines its segments based on unconsolidated financial results by segment. The absolute amount of income is greater than the absolute amount of loser. because of that:

A

company uses 10% of total income from segments earning income as the threshold for determining reportable segments

89
Q

since all companies meet at least one of the criteria for the 10% segment reporting then:

A

all will be reported

(any of them are applicable and can be used differently for each segment)

  1. combined revenues
  2. operating income
  3. identifiable assets
90
Q

Under IFRS and US GAAP, what is disclosed for an entity’s reportable segments?

A

segment profit or loss, segment assets

91
Q

Under IFRS and US GAAP, what is NOT disclosed for an entity’s reportable segments?

A

segment cash flow

92
Q

Under only IFRS, what is disclosed for an entity’s reportable segments?

A

segment liabilities, if such a measure is regularly provided to the chief operating decision maker

93
Q

for interim reporting purposes, costs that benefit multiple periods should be:

A

allocated equally to those periods (R&D, property taxes)

94
Q

Under Regulation S-x an entity’s audited FS filed with the SEC should include 2:

A

BS for the most recent fiscal years and the statements of income, changes in owners equity, and cash flows for the 3 fiscal years preceding the date of the most recent audited BS

95
Q

in 2002, the SEC approved a deadline of ____ days for Form 10-K “accelerated filers”

A

75

96
Q

accelerated filer is:

A

an issuer

  • with a public float of greater than or equal to $75 million
  • Subject to the Securities Exchange Act’s reporting requirements for greater than or equal to 12 months
  • that previously filed at least 1 report
  • which is not eligible to file quarterly and annual reports on Forms 10-QSB and 10-KSB
97
Q

in 2002, the SEC approved a deadline of ____ days for Form 10-K “large accelerated filers”

A

60

98
Q

large accelerated filers is:

A

issuer with public float over $700 million

99
Q

in 2002, the SEC approved a deadline of ____ days for Form 10-K “non-accelerated filers”

A

90

100
Q

Due to the absence of seasonal fluctuations, _________ is the appropriate period to include in addition to the most recent quarter end on filing of quarterly FS with the SEC on Form 10-Q

A

the end of the preceding fiscal year

101
Q

Form 8-K is a form required to be filed by all companies registered with the SEC. The form reports on:

A

major corporate events including:

  • corporate asset acquisitions/disposals
  • accountant changes
  • financial statement changes
  • management changes
  • changes in securities
102
Q

Form 10-k reports on:

A

quarterly results of operations

103
Q

XBRL FS exhibit is required to be submitted with a filer’s:

A
  • 10-K
  • 20-F
  • 6-K

because they include filer’s FS

104
Q

Form 3, 4 and 5 are required to be filed by:

A

directors, officers, or beneficial owners of more than 10% of a class of equity securities of a registered company

105
Q

Form 3, 4 and 5 do not contain registered company’s FS because:

A

they aren’t filed by the company and so they are not required to present company FS in an exhibit prepared using XBRL

106
Q

The SEC’s Interactive Data Rule requires a US public company submitting Form 10-k to present:

A

FS including BS, statement of comprehensive income, and all footnotes, and any applicable FS schedules, in an exhibit prepared using XBRL

107
Q

Form 11-k is:

A

the annual report of an entity’s employee benefit plan and would include the FS of the benefit plan

108
Q

Form 10-k is:

A

the annual report of a US registered company and would contain FS prepared using GAAP, MD&A, and financial disclosures

109
Q

Form 20-F is:

A

the annual report of non-US registrant and would contain FS

110
Q

in 2002, the SEC approved a deadline of ____ days for Form 10-Q “large accelerated filers”

A

40

111
Q

Form 10-Q is a quarterly report filed within ____ days for large corporations and ____ days for small corporations after the end of the fist three quarters of each fiscal year. It must contain:

A

40, 45, reviews of interim financial info by an independent CPA

112
Q

________ sets forth the form and content of and requirements for interim and annual FS to be filed with the SEC

A

Regulation S-X

113
Q

________ sets forth non-financial reporting requirements for various SEC filings used by public companies

A

Regulation S-K

114
Q

______ sets forth the disclosure requirements for small business issuers

A

Regulation S-B

115
Q

_______ sets forth rules governing electronic filings

A

Regulation S-T

116
Q

The entire amount of a gain or loss from sale of fixed assets should be reported during:

A

period (quarter) incurred

117
Q

Form 6-K is filed:

A

semiannually by foreign private issuers

118
Q

Form 10-Q is filed:

A

quarterly by US registered companies

119
Q

Form 40-F is filed:

A

annually by specific Canadian companies registered with the SEC

120
Q

Which forms contain audited FS?

A

40-F, 10-K, 20-F

121
Q

Which forms contain unaudited FS?

A

6-k and 10-Q

122
Q

The effective income tax rates for operations for the full year should reflect:

A
  • anticipated foreign tax rates
  • available tax planning alternatives
  • effect of other anticipated tax credits
  • capital gains rates
  • foreign tax credits
123
Q

Form S-1 is:

A

the report used to register securities with the SEC

124
Q

A 14A proxy statement is a statement required of a firm when:

A

soliciting shareholder votes. (filed in advance of the annual meeting and is filed with SEC)

125
Q

a small filer has worldwide market value of outstanding common equity held by non-affiliates of less than:

A

$75 million

126
Q

decrease in prepaid interest is added when calculating accrual basis interest expense because:

A

a decrease in prepaid interest increases interest expense

127
Q

decrease in interest payable is subtracted when calculating accrual basis interest expense because:

A

a decrease in interest payable implies that cash interest payments exceeded accrual basis interest expense

128
Q

the amount debited to operating expenses must be adjusted downward by the increase in accrued liabilities and adjusted upward by the increase in prepaid expenses to calculate:

A

the amount of operating expenses which were paid

129
Q

income tax-basis FS recognize events when:

A

taxable income or deductible expenses are recognized on the entity’s tax return

130
Q

non-taxable income or deductible expenses are shown on the FS and included in the determination of income and become M-1 adjustments to arrive at:

A

taxable income

131
Q

in FS prepared on the income-tax basis, the nondeductible portion of expenses (such as meals and entertainment) should be included in:

A

the expense category in the determination of income

132
Q

OCBOA FS should include FS equivalent to:

A

the accrual basis BS and IS. (statement of cash flows is not required)

133
Q

OCBOA FS disclosures should be similar to:

A

GAAP FS disclosures

134
Q

common modifications made to cash basis FS:

A
  • recording long-term liabilities
  • accrual of income taxes
  • capitalization of inventory
135
Q

recognizing expenses based on the methods and principles used to prepare the tax return is done when preparing:

A

tax basis FS

136
Q

approach for converting from cash to accrual:

A
  1. add increases in current assets
  2. subtract decreases in current assets
  3. add decreases in current liabilities
  4. subtract increases in current liabilities
137
Q

approach for converting from accrual to cash:

A
  1. subtract increases in current assets
  2. add decreases in current assets
  3. subtract decreases in current liabilities
  4. add increases in current liabilities
138
Q

cash ratio:

A

cash + marketable securities / current liabilities

139
Q

quick ratio:

A

cash + net receivables + marketable securities / current liabilities

140
Q

working capital turnover:

A

sales / average working capital

141
Q

using cash to buy inventory would _____ average inventory but _____ COGS

A

increase, no affect to

142
Q

(decreasing) selling inventory means net sales:

A

increases

143
Q

times interest earned measures:

A

the ability of a company to cover interest charges. the greater the ability, the less risk of bankruptcy

144
Q

since new partner is receiving a 25% interest in the partnership, his capital account will be credited with 25% of the total equity of the new partnership. The difference between his contribution and his capital account balance is credited to:

A

the other partners as a bonus

145
Q

Assets contributed by a partnership (or sole proprietorship) to a corporation in its formation are valued at:

A

assets fair market value - any related liabilities assumed by the corporation (mortgage note on real property)

146
Q

when a partnership is incorporated with stock, assets fair market value - any related liabilities assumed by the corporation =

A

common stock + additional paid in capital squeeze

147
Q

bonus paid has the same impact as additional net income, and is shared in:

A

the old profit and loss ratio

148
Q

under the bonus method, new partners capital account is calculated as:

A

existing capital balance + new partners investment at fair value = new partnerships capital balances * new partners capital interest = new partners capital balance

149
Q

the positive difference between the new capital account and the investment’s fair value would be:

A

debited to old partners capital accounts based on their profit and loss sharing ratio

150
Q

the negative difference between the new capital account and the investment’s fair value would be:

A

credited to old partners capital accounts based on their profit and loss sharing ratio

151
Q

calculation of goodwill to original partners:

A

new partners investment / % of total capital = total capital - existing capital balances = goodwill to original partners

152
Q

under good will method, initial capital balance

A

partners contributions + goodwill = initial capital balance

153
Q

under good will method, ending capital balance

A

partners contributions + goodwill = initial capital balance + net income - draws = ending capital balance

154
Q

interest credited to capital accounts based on weighted average:

A

capital account activity * months = dollar months

total dollar months / 12 = weighted average

weighted average * interest rate = interest credited to capital account

155
Q

in accounting for partnership withdrawal, dissolution or admission: ________ increases or decreases the individual partners accounts without changing total net assets of the partnership

A

bonus method

156
Q

______ increases the individual partners accounts and also changes total net assets of the partnership

A

goodwill method

157
Q

under the bonus method, the credit to the new partner’s capital account is calculated so that the new partner will receive:

A

proper ownership percentage

(the amount credited to the partners capital account as determined generally is not equal to the amount of the investment)

158
Q

steps when liquidating a partnership and distributing cash:

A

Step 1: sell other assets for cash: sales price - book value = gain/loss
Step 2: use cash to payoff AP: cash(from sale) - AP = cash balance
Step 3: Allocate loss on sale of assets to partners on 60:40 basis
Step 4: offset smith’s loan against his capital account
Step 5: allocate remaining cash to smith and jones based on capital balances

159
Q

The fact that the partners agree to share profits equally does not affect their:

A

partnership capital accounts from contribution of assets

160
Q

summary of significant accounting policies does not include:

A

numbers (its a summary)

161
Q

company learns one of its largest customers filed for bankruptcy. It will negatively impact the income statements. The company plans to increase efforts to attract new customers in the hopes of replacing sales lost due to the bankruptcy. They are currently on all loans and has a solid relationship with its financiers. Is there substantial doubt about the entity’s abilities to continue operating as a going concern?

A

no substantial doubt and no disclosure required

162
Q

a customer with past due outstanding invoices filed for bankruptcy after FS date. AFUA for doubtful accounts includes a reserve for 20% of the outstanding balance, but now 100% is estimated as uncollectible. What is the JE required?

A

Bad debt expense. 80%

AFUA 80%

163
Q

gain contingency is recorded:

A

in the year it happened. (no adjusting entry required in the year before if the case started in previous year)

164
Q

historical cost is _____ price

A

entrance

165
Q

GAAP doesn’t revalue:

A

PPE (IFRS does)

166
Q

land purchased 4 years ago as investment property has increased significantly in value due to tremendous growth in the real estate market. Measurement basis?

A

historical cost

167
Q

Company’s BS includes goodwill from the acquisition of another entity 5 years ago. impairment testing conducted at year end indicated that the carrying value of the goodwill exceeded implied fair value. Measurement basis?

A

fair value level 3

168
Q

a significant portion of company’s cash and cash equivalents balance is comprised of money market funds held at various banks throughout the state. Measurement basis?

A

fair value level 1

169
Q

PPE Measurement basis?

A

cost - AD = NBV

land has no AD: historical cost

170
Q

the summary of significant accounting policies may be omitted in what report?

A

10-Q

171
Q

dividends per share and in total for each class of shares must be disclosed in what report?

A

10-K

172
Q

income tax expense disclosures are required in what report?

A

10-K

173
Q

FS and supporting schedules must be presented in an exhibit using XBRL in what reports?

A

10-K and 10-Q

Fin (4 decks)

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