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Flashcards in FINANCIAL ANALYSIS III Deck (39):
1

Auditors opinions (3)

1. Unqualified (clean),
2. qualified (notes exceptions) and
3. adverse

2

Proxy statements

News about anything requiring a shareholder vote. Changes in management, etc.

3

8-K

Acquisitions, disposal of major assets or changes in corporate governance

4

10K / 10Q

Annual (k) and quarterly (q) statements

5

Owner's equity formula

Owner's equity = contributed capital + retained earnings

6

Ending retained earnings formula

Beginning RE + revenue - expenses - dividends

7

Contra account

Used for entries that offset some part of the value of another account (e.g. accumulated depreciation or allowance for bad debts)

8

Required statements (5)

1. Balance sheet
2. Cash flow statement
3. Comprehensive income
4. Change in owner's equity
5. Explanatory notes

9

US GAAP reconciliation

Companies not using GAAP but trading in the US must reconcile their statements back to GAAP

10

IASB Framework emphasis (2)

1. More emphasis to accrual and,
2. Going concern assumption

11

Long-term contracts: % of completion

1. Recognizes revenue as a % of cost incurred
2. Used when cost & rev can be reliability estimated

12

Long-term contracts: completed contract

1. Recognizes revenue only when contract is complete
2. Used when outcome cannot be reliably estimated

13

Installment sales: normal recognition

If collect ability is reasonably assured

14

Installment sales: installment method

1. Profit recognized as % of payments received
2. Used if customer collections are unreliable

15

Installment sales: cost recovery method

1. Recover all costs before recognizing profit
2. Used if outcome is highly uncertain

16

Depreciation: double-declining

No salvage value
Use 2x the straight-line % for each period

17

LIFO

Allowed in GAAP, not allowed in IFRS

18

Intangible assets w/ indefinite lives

Not amortized, tested for impairment at least annually

19

Discontinued operations

1. after tax
2. Not included in net income from continuing operations

20

Unusual OR infrequent items

1. before tax
2. Included in net income from continuing operations

21

Unusual AND infrequent items (extraordinary items)

1. after tax
2. Not included in income from continuing operations (GAAP), included for IFRS

22

Changes in accounting methods and errors

Must fix retroactively for all periods reported

23

Note on EPS and dividends

Stock dividends and SPLITS should be applied prior to weighting the shares if they are retroactive

24

Other comprehensive income

Transactions that affect equity, but not net income:
1. Gains/losses from fx translation
2. Pension adjustments
3. Unrealized G/L from hedging/derivative transactions
4. Unrealized G/L from available for sale securities.

25

Warrants share adjustment (treasury method)

[ (avg share price - warrant price) / avg share price] * warranty quantity

26

Balance sheet formats

Account = two columns
Report = one column
Classified = groups into subtotals

27

Balance sheet cost or fair value?

Mixture of the two

28

B.S. Accounts receivable

Net realizable value

29

B.S. Inventory

Lower of cost or net realizable value

30

B.S. Tangible noncurrent assets

Historical cost - accumulated depreciation

31

B.S. Intangible w/ definite lives

Historical cost - accumulated depreciation

32

B.S. Intangible w/ indefinite lives

Historical cost, tested for impairment annually

33

B.S. Held-to-maturity

Ammortized cost

34

B.S. Trading securities

Fair value, unrealized gains/losses hit net income

35

B.S. Available-for-sale securities

Fair value, unrealized gains/losses are reported in stockholder's equity (NOT net income)

36

I.S. Trading securities

Dividends, interest, realized g/l, unrealized g/l

37

I.S. Available for sale securities

Dividends, interest, realized g/l

38

I.S. Held-to-maturity securities

Interest , realized g/l

39

Internal goodwill

Expensed as occurred