F2 FINANCIAL REPORTING AND DISCLOSURES

Question 1

WHAT IS A SUBSEQUENT EVENT?

Answer 1

EVENT THAT ACCRUES AFTER THE FISCAL YEAR BUT BEFORE THE FINANCIAL STATEMENTS HAVE BEEN ISSUED OR AVAILABLE TO BE ISSUED.

Question 2

THE TWO TYPES OF SUBSEQUENT EVENTS?

Answer 2

RECOGNIZED SUBEVENTS

AND

NON RECOGNIZED SUBSEQUENT EVENTS

Question 3

WHEN DO YOU RECORED A RECOGNIZED SUBSEQUENT EVENT?

Answer 3

WHEN CONDITIONS THAT EXISTED AT THE BALANCE SHEET DATE

Question 4

WHEN DO YOU RECORED A N0N-RECOGNIZED SUBSEQUENT EVENT?

Answer 4

CONDITIONS THAT OCCURED AFTER THE BALANCE SHEET DATE, AND DOESN’T EXIST ON THE BALANCE SHEET DATE.

Question 5

DEFINE FAIR VALUE

Answer 5

THE PRICE TO SELL AN ASSET OR LIABILITY IN AN ORDERLY TRANSACTION BETWEEN TWO MARKET PARTICIPANTS.

Question 6

DESCRIBE THE VALUATION TECHNIQUES THAT CAN BE USED TO MEASE THE FAIR VALUE OF AN ASSET OR LIABILITY.

Answer 6

MARKET APPROACH - IDENTICAL ITEMS ON ACTIVE MARKET
INCOME APPROACH - PV OF FUTURE CASH FLOWS
COST APPROACH - CURRENT REPLACEMENT COST

Question 7

DESCRIBE HIERARCHY OF FAIR VALUE INPUTS.

Answer 7

1. LEVEL 1 ACTIVE MARKET IDENTICAL ITEM
2. LEVEL 2 QUOTED MARKET FOR DIRECTLY OR INDIRECTLY OBSERVABLE ITEM
3. LEVEL 3 UNOBSERVABLE ITEM. ONLY BY BEST AVAILABE RESOURCE.

Question 8

NAME THE FOUR REQUIRED DISCLOSURE SEGMENTS

Answer 8

1. GEOGRAPHIC
2. PRODUCTION AND SERVIE
3. OPERATIONS SEGMENT
4. CUSTOMERS

Question 9

WHAT IS AN OPERATION SEGMENT?

Answer 9

THE NATURE OF THE PRODUCT
THE NATURE OF THE PRODUCTION PROCESS
THE TYPE OF CLASS OF CUSTOMER
METHODS USED TO DISTRIBUTE
NATURE OF REGULATORY ENVIRONMENT (BANKING, INSURANCE, UTILITIES)

Question 10

NAME TWO QUANTITIVE THRESHOLDS USED IN IDENTIFYING REPORTABLE OPERATION SEGMENTS

Answer 10

10 PRECNT “SIZE” TEST

75 PERCENT “REPORTING SUFFICIENCY” TEST.

Question 11

DESCRIBE THE 10 PERCENT TEST FOR IDENTIFYING REPORTING SEGMENTS

Answer 11

REVENUE 10% SALES OF COMBINED REVENUE, INTERNAL AND EXTERNAL, OF ALL OPERATING SEGMENTS.

PROFIT AND LOSS IS 10% OR MORE OF THE GREATER OF ALL PROFIT (NO LOSSES)
PROFIT AND LOSS IS 10% OR MORE OF THE GREATER OF COMBINED LOSSES (NO PROFIT)

ASSETS 10% OR MORE OF ALL COMBINED ASSETS.

Question 12

WHAT IS THE 75% TEST FOR IDENTIFYING REPORTABLE SEGMENTS?

Answer 12

THE COMBINED EXTERNAL (CONSOLIDATED) REVNEUE OF ALL REPORTABLE SEGMENTS MUST BE AT LEAST 75% OF THE TOTAL CONSOLIDATED REVNEU OF THE ENTITY.

THE PRACTICAL LIMIT IS 10 SEGMENTS, BUT THIS IS NOT A PRECISE LIMIT.

Question 13

WHAT IS THE DISCLOSURE REQUIREMENTS FOR REPORTABLE OPERATING SEGMENTS?

Answer 13

FOR EACH REPORTABLE SEGMENT, THE ENTITY MUST REPORT:

1. IDENFITYNG FACTORS
2. PRODUCTS OR SERVICES
3. PROFIT OR LOSS DETAILS
4. ASSET DETAILS
5. MEASUREMNT CRITERIA
6. RECONCILIATIONS

Question 14

DESCRIBE FORM 10K AND FORM 10-Q. WHAT LEVEL OF ASSURANCE MUST BE PROVIDED WITH THE FINANCIAL STATEMENTS SUBMITTED IN THESE FORMS?

Answer 14

10-K FILED ANNUALLY, AUDITED FINANCIAL STATEMENTS

10-Q FILED QUARTERLY, UNAUDITED FINANCIAL STATEMENTS

Question 15

DEFINE WORKING CAPITAL

Answer 15

WORKING CAPITAL = CURRENT ASSETS - CURRENT LIABILITIES

Question 16

HOW IS THE CURREN RATIO COMPUTED?

Answer 16

CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITIES

Question 17

HOW IS THE QUICK RATIO COMPUTED?

Answer 17

QUICK RATIO = ( CASH + SHORT TERM MARKET SECURITIES + NET RECEIVABLES) / CURRENT LIABILITIES

Question 18

WHAT ARE THE THREE METHODS OF PARTNERSHIP INTEREST WITH AN INVESTMENT OF ADDITIONAL CAPITAL?

Answer 18

EXACT METHOD
BONUS METHOD
GOODWILL METHOD

Question 19

DESCRIBE THE EXACT METHDO OF CREATING A NEW PARTNERSHIP INTEREST?

Answer 19

1. THE PURCHASE PRICE = THE BOOK VALUE OF THE CAPITAL ACCOUNT
2. NO ADJUSTMENTS TO THE EXISTING PARTNERS’ CAPITAL ACCOUNTS
3. NO GOODWILL OR BONUS

Question 20

DESCRIBE THE BONUS METHOD OF CREATING A NEW PARTNERSHIP INTEREST?

Answer 20

1. NEW PARTNERS CAPITAL = (TOTAL OWNERS CAPITAL ACCOUNT) * NEW PARTNERS PERCENTAGE OWNERSHIP.
2. EXCESS OF NEW PARTNER’S CONTRIBUTION IS CAPITAL INTEREST OF OLD PARTNERS.
3. EXCESS NEW CAPITAL INTEREST OVER PARTNER’S CONTRIBUTION IS A BONUS TO NEW PARTNER.

Question 21

DESCRIBE THE GOODWILL METHDO OF CREATING A NEW PARTNERSHIP INTEREST WITH AN INVESTMENT OF ADDITIONAL CAPITAL.

Answer 21

1. GOODWILL IS RECOGNIZED BASED ON THE TOTAL VALUE OF THE PARTNERSHIP IMPLIED BY THE NEW PARTNER’S CONTRIBUTION.
2. GOODWILL IS SHARED BY THE EXISTING PARTNERS USING THE AGREED PROFIT/LOSS RATIO.

Question 22

IN LIQUIDATING A PARTNERSHIP, WHAT IS THE ORDER OF PREFERENCE?

Answer 22

1. CREDITORS
2. LOAN ADVANCES TO PARTNERS.
3. CAPITAL ACCOUNTS OF PARTNERS.

REMEMBER THAT ALL LOSSES MUST BE PROVIDED FOR BEFORE DIPOSA; THAT IS, MAXIMUM POTENTIAL LOSSES BEOFRE DISTRIBUTION OF CASH.