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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

What basis is used for IFRS statement of cash flows

Direct or indirect method