FAR Module 2

Question 1

What are the two Buzz Words for what should be included in the Summary of Significant Accounting Policies?

Answer 1

BASIS and COMPOSITION

Question 2

Are disclosures of policies fixed by GAAP?

Answer 2

NO but they are considered an INTEGRAL part of the FS

Question 3

When sales are heavily concentrated, what should be disclosed?

Answer 3

Revenue $ to those customers (no names required)

Question 4

What to disclose?

Answer 4

• Use of Estimates
• Concentrations
• Entity’s Major Products & Services

Question 5

What should be included in footnote disclosures?

Answer 5

Relevant changes to stockholders’ equity / asset / liability accounts

Question 6

When should Subsequent Events that are not recognized be disclosed?

Answer 6

When there is a possible contingent loss of material amounts, that number should be disclosed as well as the nature of the event and the possibility of materiality

Question 7

Rules for SEC filers about Subsequent Event Period

Answer 7

Subsequent Event period ends when the financial statements are distributed, no disclosure is required about when the period ended

Question 8

Rules for Non-Filers about Subsequent Event Period

Answer 8

Subsequent Event period ends when the financial statements are ready for distribution, and a disclosure about this date is required

Question 9

What is a good key word to look out for when asked about a Fair-Value measurement?

Answer 9

Fair Value Measurements are Market Based NOT Entity-Specific

Question 10

What is Fair Value?

Answer 10

Price that would be received to SELL an asset or PAID to transfer a liability between market participants in an active market

Question 11

When you disclose a change in valuation technique, how is that reported in disclosures?

Answer 11

As a change in Accounting Estimate, treated prospectively

Question 12

Level 1 Inputs

Answer 12

Valuation is a quoted price for an Identical Asset

Question 13

Level 2 Inputs

Answer 13

Inputs other than quoted market prices that are observable or unobservable

Question 14

Level 3 Inputs

Answer 14

Unobservable Inputs for the asset or liability - think “internal”

Question 15

What should always be used in determining a segment’s operating income?

Answer 15

Sales to other segments

Question 16

What % of sales constitutes a reportable operating segment?

Answer 16

10% of all revenue, including revenue from unaffiliated sales & intersegment sales

Question 17

What are the three tests for deciding if a segment is reportable?
Assets
Revenue
P/L

Answer 17

1. Asset - 10% or more of combined assets
2. Revenue - Segment revenue is 10% or more
3. P/L - Abs Value of P/L is 10% or more of the > of either combined P of all segments that did not and the combined L of all segments that did

Question 18

What two things should be disclosed for each reportable segment?

Answer 18

Both Profit/Loss AND Total Assets

Question 19

Form 10-Q (Quarterlies) are reported when?

Answer 19

40 days for large accelerated & accelerated, 45 days for small

Question 20

Define the $ Limits for Size Classification:
Large Accelerated
Accelerated
Small

Answer 20

Large Accelerated Filer - > $700 Million
Accelerated Filer - $75 Million < Accelerated < $700 Million
Smaller - < $75 Million

Question 21

Define the Date Requirements for form 10-K for the 3 size classifications

Answer 21

Large Accelerated - 60 Days
Accelerated - 75 Days
Smaller - 90 Days

Question 22

Special Purpose Frameworks are what?

Answer 22

Non-GAAP entities use these instead of financial statements

Question 23

OCBOA Financial Statements - Other Comprehensive Basis of Accounting - what is a key takeaway?

Answer 23

Financial statement titles should differentiate between GAAP Financials & OCBOA

Question 24

What is not a common modification for modified cash basis?

Answer 24

Recognizing Revenues when earned - this is accrual basis

Question 25

Nondeductible portions of expenses (like meals) in income tax method should be included in….

Answer 25

Expense category in determination of income

Question 26

Income Tax Basis Financial Statements recognize…

Answer 26

Certain revenues & expenses in different reporting periods - like taxable income or deductible expenses are recognized when they are recognized on the tax return

Question 27

NET DECREASE in AR means…

Answer 27

Cash collected exceeds revenue recognized on accrual basis

Question 28

NET DECREASE in Accrued Expenses means…

Answer 28

Cash paid to reduce Accrued Exp was more than accrual basis expense reported

Question 29

How to go from Cash to Accrual…

Answer 29

1. Add increase in CA
2. Subtract decrease in CA
3. Add decrease in CL
4. Subtract increase in CL

Question 30

Study your Ratios!! Becker F2M7 FlashCards

Answer 30

Study Those!! Memorize the ratios