Subsequent Events/Significant Accounting Policies & Credit Risk

Question 1

Subsequent Event?

Answer 1

events/transactions that occur after the balance sheet date and prior to the issuance or availability for issuance of the financial statements

Question 2

Recognized subsequent events

Answer 2

events affecting the realization of assets or the settlement of estimated liabilities ordinarily require recognition
-settlement of litigation for an amount differing from the liability recorded in the statements
-loss on a receivable resulting from a customer’s bankruptcy
-changes in the data used in inventory valuation at the lower of cost or NRV

Question 3

Unrecognized subsequent events

Answer 3

provides evidence about conditions that did not exist at the date of the balance sheet. Do not require recognition but some require disclosure
-sales of bond or stock issuance
-business combination
-settlement of litigation for event that occurred after the balance sheet date
-loss on receivables from conditions occurring after the balance sheet date
-classification of long-lived assets as held for sale
-extinguishment of debt after balance sheet date

Question 4

Commonly required disclosures

Answer 4

-basis of consolidation
-depreciation method
-amortization of intangibles
-inventory pricing
-recognition of revenue from contracts with customers
-recognition of revenue from leasing operations
–disclosure should not duplicate details presented elsewhere

Question 5

Financial instruments an entity must disclose significant concentrations of credit risk

Answer 5

-instruments of pension plans
-certain insurance contracts
-warranty obligations and rights
-unconditional purchase obligations