Flashcards in Financial Statements Deck (81):
1
Which Personal Financial Statements are required?
Statement of Financial Condition & Statement of Changes in Net Worth
2
How are assets and liabilities valued in a Personal Financial Statement?
Estimated current value
3
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
4
What is the general presentation on a statement of financial condition?
Assets
- Liabilities
- Estimated taxes on assets sold
: Net Worth
5
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
6
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
7
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.
8
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
9
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
10
How are cumulative gains and losses reported in Interim Financials?
Reported as if they occurred in the first quarter
11
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
12
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
13
For whom is Segment Reporting required?
Publicly traded companies
14
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
15
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
16
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
17
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
18
Number of years required to disclose estimated future contributions to defined benefit plan
Following year only
19
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
20
What is pension interest cost?
Increase in FV of plan assets due to passage of time
21
How does plan amendment for prior service cost affect current and past financial statement
Change reflected on current and future statements
No retroactive change
22
What is unfunded accrued pension cost?
A liability recognized when the net periodic pension cost exceeds amount the employer has contributed to the plan
23
Calculate PBO
Beg PBO + service cost + interest - benefits paid
24
What is used as the Defined benefit plan discount rate
Settlement rate
25
Treatment of multiple defined benefit plans
Aggregate all overfunded plans as no current asset ; aggregate all underfunded plans as noncurrent liability
26
Journal entry to record underfunded plan
DR OCI
CR pension liability
27
What is included in special termination benefits
Lump sum payments and PV of future payments
28
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
29
Disclosure of health care costs for pension
Must disclose the effect of 1% increase or decrease in health care costs
30
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
31
Disclosure for increase in health car cost for
Both aggregate of service and interest components and accumulated post retirement pension obligation
32
Calculation of net periodic post retirement benefit cost excludes
Benefit payments
33
What is attribution period for post retirement health care benefit
Hire date through date of full eligibility
34
What is a transition obligation
Difference between accumulated benefit obligation and FV of plan assets at beginning of year
35
When can transition obligation be recognized
Recognize immediately or amortized over straight one basis over max of 20 years ( or 20 years if elected)
36
What method does IFRS use defined benefit plans
Projected unit cost method
37
When can pensions be netted user IFRS?
Only of there is a legally enforceable right to use plan assets of one plan to settle obligations of another
38
When to report a segment
If segment meets one of the 10 percent tests, 10% of
Revenues
Operating profit
Assets
39
What is included in segment revenue
Sales of unaffiliated customers
Intersegment sales
Not interest on loans to other segments
40
When to report customer
Sales to customer greater than 10% of enterprise revenue
41
How many segments are needed
Segments must be at least 75% of unaffiliated revenues
42
What enterprise wide disclosures are required
Products
Services
Geographic areas
Major customers
43
Who is required to provide enterprise wide disclosures
All public enterprises including those with a single reportable segment
44
Examples of segment disclosures
External revenue
Intrasegment revenue
Interest rev and expense
Depreciation
Unusual or extraordinary items
Equity in net income of investees accounted for using equity method
Significant noncash items
45
When may two segments be aggregated
If all aggregation years are met
Or
If after performing the 10% test a majority of aggregation criteria are met
46
What is the management approach
Method chosen for determining what information to report
47
How is the segment profit as loss shown
Shown as would be internally, including criteria from the Chief Decision maker
48
Rules for IFRS segment reporting
Management approach used to identify segments
Revenue, asset and profit and loss tests used
49
How are extraordinary items reported in interim FS
Reported in period incurred, not allocated to several periods
50
How is a change in inventory method or any retrospective change handled I interim FS
Restate prior interim statements, change not reported in current interim FS
51
How should cost charged in an annual period (depreciation, bonuses) be treated for interim FS
Allocated among interim periods which clearly benefit from the expense through accruals and deferrals
52
How is the tax provision for an interim period calculated
Tax for year to date (estimated yearly effective rate x YTD income) less total tax provision reported for prior periods
53
When is deferral of advertising expense allowed in year end reporting
Only when advertising has not been run in the media
54
How is planned volume variance expected to be absorbed by year end treated for interim FS
Should be deferred for interim periods
55
Treatment of temporary decline in inventory value due to market in interim FS
If temporary, not recorded in interim FS
56
Treatment of permanent decline in inventory value, and subsequent increase in value in later period in interim FS
Decrease recorded in interim period, increase recorded in future period up to the amount of original decrease
57
Use of estimated GP rates to determine COGS for interim period
Allowed for COGS calculation
58
What is considered when finding effective tax rate for interim period
Effective tax rate should reflect investment tax credit, foreign tax rates, depletion percentage, capital gain rates, and tax planning alternatives
59
What is the integral view for interim reporting
Each interim period is integral part of annual period, same accruals, deferrals, and accounting methods
60
What is the primary purpose of interim reporting? What is sacrificed?
Primary purpose is timeliness
Sacrifice reliability
61
IFRS requirements for interim reporting
and statements required
IFRS does not require interim reporting
If presented interim reporting must include
Statement of financial position
Statement of change in equity
Statement of comprehensive income
Statement of cash flows
62
What is included in comprehensive income
All changes in equity except those resulting from investments by owners and distributions by owners
63
What is realization
Process of converting noncash resources and rights into many through the sale of assets for cash or claims to cash
64
What is an exception to a rule of accruing revenue at time of sale
Agricultural products that are homogeneous and have immediate marketability at quotes prices
65
How are office supplies treated under the accrual method
Inventoried, expensed when used
66
How is contingent revenue recognized under the milestone method
When milestone achieved contingent revenue in its entirety is recognized
67
When to report the effects of indirect and direct effects of accounting changes
Direct - earliest period
Indirect - period of change
68
How is an accounting change recorded if impracticable to determine cumulative effect and period ? If only cumulative effect can be determined?
Present change on prospective basis
Change in earliest period which it can be determined
69
How are the costs of exit activities and restructuring charges measured
At fair value when incurred
70
What is the principle market
Market in which the reporting entity would sell the asset or transfer the liabilities with the greatest volume and level of activity for the asset or liability
71
How should a change in valuation technique used to remeasure FV be recorded
As a change in estimate. No disclosure required
72
What items are restated in constant dollar accounting
Only Nonmonetary items
73
What is current cost accounting
Method of valuing and reporting assets, liabilities, revenue and expense at current cost at the balance sheet date or date of sale
74
Calculate current cost holding gain
Current replacement cost - purchase price
75
Calculate current cost depreciation
Average current cost - salvage / useful life
76
How are inventory and equipment valued under the current cost method
Lower of current cost or recoverable amount
77
Calculate current cost accounting COGS
# of units sold x avg current cost of units
78
When is the liquidation method of accounting used
When liquidation is imminent
79
What are the requirements for financial reports and forecasts
Prepared in accordance with GAAP
With the plans of the entity
With due professional care
80
What are the required trust fund FS
Statement of assets and liabilities
Statement of operations
Statement of changes in net assets
81