Income Part 2 Flashcards
(19 cards)
Old building sold how will it be valued?
The old building being actively marketed for sale will be valued at the lower of its book value or net realizable value (fair value less the costs to sell)
Depreciating Assets Held for Sale?
Assets held for sale are no longer depreciated.
Comprehensive income and what it includes
The unusual and infrequent gain is a component of the net income of $400,000 and does not need to be added to compute total comprehensive income.
Define Comprehensive income
Comprehensive income is the change in equity of a business during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity except those resulting from investments by owners and distributions to owners. SFAC 6 para 70.
other comp. income property
Accumulated other comprehensive income is a component of stockholders’ equity on the balance sheet.
Comprehensive income may be shown on the face of a combined “statement of income and comprehensive income” a separate section below net income, or
In a separate “statement of comprehensive income,” or
As a component of the “statement of changes of owners’ equity” (U.S. GAAP only).
The income tax expense or benefit allocated to components must be disclosed, either on the face of the statement or in notes to the statement.
Reclassification adjustments must be shown in the financial statement that discloses comprehensive income
Reclassification entries may be necessary to avoid double counting an item previously reported as comprehensive income (i.e., unrealized gain), which are now reported as part of net income (i.e., realized gain).
What is in significant accounting policies?
The summary of significant accounting policies should disclose policies. The only policy in this question is the “basis” of profit recognition on long-term construction contracts. The other disclosures are accounting details and would be disclosed in other footnotes, but not in the summary of significant accounting policies.
General Principle of disclosing
For a related party transaction, both the amount due to the affiliate and the dollar amount of the purchases during the year must be disclosed. In disclosure questions, if you are not sure, disclose the most rather than the least.
Define going concern
An entity is considered to be a going concern if it is reasonably expected to remain in existence and to be able to settle all its obligations for the foreseeable future. Management is required to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern for a reasonable period of time not to exceed one year beyond the date of the financial statements.
A major difference between U.S. GAAP and IFRS guidance for consideration of going concern is
IFRS does not offer guidance on the basis of accounting to use in case of imminent liquidation. U.S. GAAP provides specific guidance about preparing financial statements and necessary disclosures when liquidation is imminent (liquidation basis of accounting)
the elements of relevance
Predictive Value
Confirming Value
Materiality
Elements of Faithful Representation
Neutrality
Completeness
Freedom from Error
Reporting the operations of segments is reported on which occasions?
Only publicly-traded enterprises are required to report on business segments
Reporting Interest expense, income taxes, and general corporate expenses to segments?
Operating profit by segments is based on the measure of profit reported to the “Chief Operating Decision Maker.” Interest expense, income taxes, and general corporate expenses are not allocated to the divisions solely for the purposes of segment disclosures; they may be allocated if that is how the segments report to the “Chief Operating Decision Maker.”
Reporting the operations of segments is reported on which occasions?
Only publicly-traded enterprises are required to report on business segments
What does not need to be reported for Segment disclosure?
Segment cash flow is not reported under IFRS (or U.S. GAAP)
Not audited financials?
Form 6-K is filed semi-annually by foreign private issuers and contains unaudited financial statements. Form 10-Q, which is filed quarterly by U.S. registered companies, also contains unaudited financial statements.
What should be in a 10-Q if no seasonal changes occur?
Due to the absence of seasonal fluctuations, the end of the preceding fiscal year is the appropriate period to include in addition to the most recent quarter end.
