FSA Flashcards
(68 cards)
What is an 8-K Filing?
SEC-required filings include Form 8-K, which a company must file to report events, such as acquisitions and disposals of major assets or changes in its management or corporate governance.
What’s the difference between a Form 10-K and a Form 10-Q?
Companies’ annual and quarterly financial statements are also filed with the SEC (Form 10-K and Form 10-Q, respectively).
Compare a qualified opinion vs an unqualified opinion?
An unqualified opinion (also known as an unmodified opinion or clean opinion) indicates that the auditor believes the statements are free from material omissions and errors. If the statements make any exceptions to the accounting principles, the auditor may issue a qualified opinion and explain these exceptions in the audit report
What’s an adverse opinion?
The auditor can issue an adverse opinion if the statements are not presented fairly or are materially nonconforming with accounting standards.
What does the Sarbanes-Oxley Act require?
Management is required to provide a report on the company’s internal control system.
US GAAP and IFSR were developed by…
US GAAP- FASB
IFRS- IASB
US GAAP and IFSR are based on rules or principles?
US GAAP- Rules
IFRS - Principles
Which inventory valuation styles are permitted under IFRS vs US GAAP?
US GAAP- FIFO, LIFO and Weighted Average permitted
IFRS- LIFO prohibited
Do product development costs get expensed or capitalised under US GAAP & IFRS? How about research?
US GAAP - Expensed
IFRS - May be capitalised
Both expense research as incurred
Is interest paid CFO CFI or CFF under US GAAP and IFRS?
US GAAP - CFO
IFRS - CFO or CFF (but dividends received can be CFO or CFI)
Are reversals of inventory write-downs permitted under US GAAP and IFRS?
US GAAP- Prohibited
IFRS- Allowed
When should a firm recognise revenue under US GAAP vs IFRS?
When the good/service has been transferred to the customer
When should expenses be recognised under US GAAP and IFRS?
Expense recognition is based on the matching principle, whereby expenses for producing goods and services are recognized in the period in which the revenue for the goods and services is recognized.
When do non-revenue costs (ie admin) get recognised?
Expenses that are not tied directly to generating revenue, such as administrative costs, are called period costs and are expensed in the period incurred.
What’s the difference between retrospective and prospective application of accounting changes?
With retrospective application, any prior-period financial statements presented in a firm’s current financial statements must be restated, applying the new policy to those statements as well as future statements. Retrospective application enhances the comparability of the financial statements over time. With prospective application, prior statements are not restated, and the new policies are applied only to future financial statements.
Do changes in accounting policy require retrospective or prospective application?
Retrospective unless impractical
What is the usual cause of a change in accounting estimate? Are these usually applied retrospectively or propspectively?
A result in the change of manager’s judgement, usually due to new information (ie length of product life). these are usually applied propospectively
What’s a prior period adjustment, and does it require retrospective or prospective application?
A change from an incorrect accounting method to one that is acceptable under GAAP or IFRS is required. A correction of an accounting error is reported as a prior-period adjustment and requires retrospective application
Common size income statements express each category on the income statement as a % of…. What are these good for?
Revenue and this format is useful for time-series and cross-sectional analysis and facilitates the comparison of firms of different sizes.
Gross Profit Margin =?
Gross Profit Margin = Gross Profit/ Revenue
Net Profit Margin =?
Net Profit Margin = Net Income/Revenue
Operating Profit Margin =?
Operating Profit Margin = Operating Profit/Revenue
Pretax Margin =?
Pretax Margin = Pretax Accounting Profit/Revenue
What do Margin Ratios examine?
Margin ratios examine how well management has done at generating profits from sales. The different ratios are designed to isolate specific costs. Generally, higher margin ratios are desirable.
