Financial Reporting And Analysis

Front 1

Balance Sheet (statement of financial position or statement of financial condition)

Back 1

1. assets

2. liabilities

3. owner's equity - residual interest in the net assets

Front 2

Statement of comprehensive income

Back 2

all changes in equity except for shareholder transactions (eg issuing stock, repurchasing stock, dividends)

Front 3

Income statement

Back 3

1. revenues

2. expenses

3. other income - that arise not in the ordinary course of business

Front 4

Statement of cashflows

Back 4

report cash receipts & payments

1. operating cfs

2. investing - acquisition or sale of PPE

3. financial Cfs - issue or retire of firm's debt and equity securities

Front 5

Management commentary (management discussion)

Back 5

Most useful section - discusses nature of the business, past performance, future outlook

Front 6

Standard auditor's opinion (3 parts)

Back 6

1. performed an independent review

2. reasonable assurance that no material errors

3. in accordance with accepted accounting principles

Front 7

Unqualified opinion

Back 7

"clean opinion" auditor approves of statement

qualified - bad

Front 8

Adverse opinion

Back 8

bad - means statements are not presented clearly

Front 9

Proxy statements

Back 9

things issued to shareholders when there needs to be a shareholders vote

Front 10

Inventories - IFRS

Back 10

Lowest cost or net realizable value (selling price - completion costs & selling costs). If net realizable value < inventory value on balance sheet write down & incur a loss on income statement. Under IFRS allowed to write back up

Front 11

Inventories - GAAP

Back 11

Lowest cost or market (replacement cost). If market > inventory balance write down and incur loss on income statement. Under GAAP not allowed to write back up.

Front 12

Deferred tax assets

Back 12

Taxes payable > tax expense

Front 13

List CA's

Back 13

1. Cash & Equivalents - amortized cost

2. Market securities

3. A/R - net realizable value

4. Inventories

5. Other - (prepaid expenses, deff. tax assets)

Front 14

Standard Costing

Back 14

method to measure inventory - used by manufacturing firms

- assign predetermined amounts of materials, labor and overhead to goods prodcued

Front 15

Retail Method

Back 15

method to measure inventory

- uses retail prices and then subtracts out gross profit

Front 16

List CL's

Back 16

1. A/P

2. Notes payable & current portion of LT debt

3. Accrued liabilities

4. Unearned revenue

Front 17

List Non-current assets

Back 17

1. PP&E

2. Investment Property - assets that generate rental income or capital appreciation

3. Intangible assets

4. Financial Assets

Front 18

Cost Method for PP&E

Back 18

All PP&E (minus land) is reported at amortized cost (historical - Acc. dep, amortization, depletion, & impairment)

- tested for impairment

- impairment occurs if carry value > recoverable value

- GAAP

Front 19

Value in use

Back 19

Recoverable amount under IFRS - PV's of asset's future cash flows

Front 20

Unidentifiable Intangible Assets

Back 20

cannot be acquired (must be built internally) and may have an unlimited life ex: good will

Front 21

Identifiable Intangible Assets

Back 21

Acquired separately - ex: patents, trademarks etc.

Front 22

Financial Instruments

Back 22

Contracts that rise a financial asset of one firm and fin. liability of another firm.

- ex: stocks, bonds, derivs, loans, recievables

- measured in historical cost, amortized cost, fair value

Front 23

Fin. Instruments @ historical costs

Back 23

unquotes equity investments, loans to and receivables from

Front 24

Fin. Instruments @ amortized costs

Back 24

held-to-maturity securities - debt acquired and held to maturity.

calc. amortized cost = issue price - principal PMTS + amortized discount - amortized premium - impairment losses

Front 25

Fin. Instr @ Fair value (mark-to-market)

Back 25

- trading securities, available-for-sale, and derivatives

- Trading securities - held for trading want them to profit in near term. reported on balance sheet & unrealized gains/losses are on income statement (same with derivs)

- Available-for-sale - not expected to be held to maturity or profit in near term. Unrealized gains/losses are not on income sheet but are on other comprehensive income

Front 26

List Non-current liabilities

Back 26

1. Long-term fin. liabilities

2. deff. tax liability when expenses > tax payables

Front 27

List Shareholders' Equity

Back 27

1. Contributed capital

2. pref. stock

3. non-controlling interest

4. retained earnings

5. treasury stock

6. acc. other comprehensive income

Front 28

Common-size balance sheet

Back 28

list all line items as a % of total assets

Front 29

Direct method

Back 29

- presentation of operating cf's

- each line item of income statement is converted to cash receipts or PMTs

- converts accrual method to a cash-basis method

Front 30

Indirect method

Back 30

- presentation of operating cf's

- takes net income & makes adjustments for transactions that affect net income but are not cash

Front 31

Activity ratios

Back 31

(asset utilization or turnover ratios) show well a firm utilized assets such as inventory and fixed assets

Front 32

Receivables Turnover

Back 32

Annual sales/ avg. receivables

Front 33

Avg. collection period

Back 33

=365/ receivables turnover

Front 34

Inventory Turnover

Back 34

Cogs/ Avg. inventory

Front 35

Payables turnover

Back 35

purchases / avg. trade payables

purchases = (end inv. - beginning inv. * COGS)

Front 36

Defensive internal ratio

Back 36

# of days the firm could pay off its avg. cash expenditures with its current liquid assets

= cash + market securities + receivables/ avg. daily expenditures

expenditures = cash from COGS, SG&A, R&D + dep.

Front 37

Tax burden ratio

Back 37

Net Income/ EBT - lower ratio = higher burden

Front 38

Interest burden ratio

Back 38

EBT/ EBIT

Front 39

Business Segment

Back 39

Portion of a larger company that accounts for more than 10% of company's revenues

Front 40

Sensitivity Analysis - pro forma

Back 40

based on "what if" questions

Front 41

Scenario Analysis

Back 41

based on specific set of outcomes for key variables

Front 42

Simulation Analysis

Back 42

technique used in which probability distributions for key variables are selected and a computer is used to generate a distribution of values for outcomes

Front 43

Product Inventory Costs

Back 43

1. Purchase expense

2. conversion costs (labor and overhead)

3. other ex: cost to transport to shipping location

- capitalized costs so they are expensed in the same period inventory is sold

Front 44

Period Inventory Costs

Back 44

1. Abnormal labor/ over head

2. storage

3. admin

4. selling

- expensed in period in which they occur

Front 45

Periodic Inventory System

Back 45

Inventory value & COGS determined at the end of the period (use a purchases account)

- no detailed records of inventory are maintained

= begin inventory + purchases = Cost of goods sold available

COGS = goods available for sale - ending inventory

Front 46

Perpetual Inventory System

Back 46

Inventory values & COGS updated continuously

Front 47

Revaluation Method for PP&E

Back 47

allowed by IFRS firms - allows firms to report long-lived assets at their fair value, as long as there is an active market for the asset

Front 48

Derecognition

Back 48

when long-lived assets are sold, exchanged or abandoned

Front 49

Taxes payable

Back 49

The tax liability on the balance sheet - can also be called current tax expense

Front 50

Tax loss carryforward

Back 50

A current/past loss that can be used to reduce taxable income (can result in a deferred tax asset)

Front 51

Tax base

Back 51

Net amount of an asset or liability used for tax reporting purposes

Front 52

Accounting Profit

Back 52

Pretax financial income (income before tax, earnings before tax)

Front 53

Income tax expense

Back 53

Expense recognized on income statement that includes taxes payable & changes in deff. tax assets & liabilities.

= Taxes Payable + DTL - DTA

Front 54

Deferred tax liabilities

Back 54

Balance sheet amount that results from excess income tax expense > taxes payable

Front 55

Deferred tax assets

Back 55

Balance sheet amount that results from an excess of taxes payable > tax expense

Front 56

Valuation allowance

Back 56

Reduction of deferred tax asset based on likelihood asset will not be realized

Front 57

Temporary Difference (Taxes)

Back 57

diff. between tax base & carrying value that will result in increased taxable amount or deductible amounts

Front 58

How a Tax Asset occurs?

Back 58

Tax Expense < Tax Payable

- Revenues taxable before on recognized on I/S

- Expenses on I/S before they are tax deductible

- Tax loss carryforwards

- Post-employment benefits, warranty expenses, tax loss carryforwards

Front 59

How a Tax Liability occurs?

Back 59

Tax Expense > Tax Payable

- Revenues put on I/S before taxable

- Expenses taxable before put on I/S

- Most common because dep. method is different on I/S then used for taxes

Front 60

Statutory Rate

Back 60

tax rate of the jurisdiction where the firm operates