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Flashcards in Financial Statements Deck (81)
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Which Personal Financial Statements are required?

Statement of Financial Condition & Statement of Changes in Net Worth


How are assets and liabilities valued in a Personal Financial Statement?

Estimated current value


How are estimated taxes that would be paid if all assets were converted into cash and all liabilities paid presented on a Personal Financial Statement?

Presented on Statement of Financial Condition between Liabilities and Net Worth


What is the general presentation on a statement of financial condition?

- Liabilities
- Estimated taxes on assets sold
: Net Worth


How is life insurance presented on a Personal Financial Statement?

Only shown if there is cash surrender value

It is shown net of loans against the policy


How are business interests shown on a Personal Financial Statement?

Business Interests that constitute a large percentage of total assets should be separated from other investments


What is the discreet view in an Interim Financial Statement?

Interim period is a separate accounting period - not GAAP

Same accounting principles used for annual reporting should be used.


What is the integral view in an Interim Financial Statement?

Interim period is a part of the annual period - GAAP

Gross profit method may be used to estimate COGS and inventory

Temporary declines in inventory aren't recognized


How are discontinued operations & extraordinary items reported in Interim Financial Statements?

Aren't prorated

Fully recognized in Interim Period as incurred

If it occurs in Q3 - it's recognized in Q3


How are cumulative gains and losses reported in Interim Financials?

Reported as if they occurred in the first quarter


How is inventory valuation handled in Interim Financials?

If inventory experiences a decline in value during an interim period - the loss is recognized in the interim period

If the loss is expected to be only temporary - no loss is recognized


What is one of the primary problems with interim reporting?

The matching principle gets messed up - Expenses incurred in one period may benefit future periods


For whom is Segment Reporting required?

Publicly traded companies


What factors cause a segment to be significant and therefore to be reported separately?

Revenue of segment is 10% or more of total

Profit is 10% or more of total

Segment assets are 10% or more of total

75% Test - All segment revenues must equal 75% of total external revenues


What is the disclosure requirement regarding sales of 10% or more for one customer?

If 10% or more of enterprise revenue comes from one customer - the segment making the sales must be disclosed


How to report gain or loss from single occurrence not directly related to operation of pension plan

Report as part of that occurrence and not part of plans activity


What is the corridor approach

Determines gain or loss amortization on unrecognized net loss
Recognized gain or loss is excess of 10% of greater of PBO or MRAV over unrecognized net loss
Value / average remaining service period is amortization


Number of years required to disclose estimated future contributions to defined benefit plan

Following year only


What is prior service cost? How is it recognized?

PV of retroactive benefits given to employees for years of service provided before date of amendment to plan
Recognize as expense (amortized) during service periods of those employees who are expected to receive benefits under plan


What is pension interest cost?

Increase in FV of plan assets due to passage of time


How does plan amendment for prior service cost affect current and past financial statement

Change reflected on current and future statements
No retroactive change


What is unfunded accrued pension cost?

A liability recognized when the net periodic pension cost exceeds amount the employer has contributed to the plan


Calculate PBO

Beg PBO + service cost + interest - benefits paid


What is used as the Defined benefit plan discount rate

Settlement rate


Treatment of multiple defined benefit plans

Aggregate all overfunded plans as no current asset ; aggregate all underfunded plans as noncurrent liability


Journal entry to record underfunded plan


CR pension liability


What is included in special termination benefits

Lump sum payments and PV of future payments


What is included in the PBO reconciliation

Service cost
Benefits paid
Interest cost
Contribution by plan participants
Actuarial G/L
Plan amendments
Divestiture and settlements
Special termination benefits


Disclosure of health care costs for pension

Must disclose the effect of 1% increase or decrease in health care costs


Calculate expected future service method

Group employees according to time remaining to retirement. Multiply the number in each group by the period to retirement. Divide into # of employee service years