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102 Cards in this Set
- Front
- Back
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What reports the financial position of a company at a particular date?
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Balance sheet
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What does not attempt to show the total fair value of a company?
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Balance Sheet
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What is meant to be useful to external users who wish to estimate the company's fair value?
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Balance sheet
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What 5 things is the balance sheet useful for assessing?
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Liquidity, financial flexibility, oprating capability, income producing performances and capital
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What refers to how quickly a company can convert an asset into cash to pay its bills?
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Liquidity
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What refers to the ability of a company to use its financial resources to adapt to change?
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Financial Flexibility
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What refers to the ability of a company to maintain a given physical level of operations?
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Operating Capability
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What income relative to capital (return on investment)?
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Income producing Performance
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What is assets less liabilities?
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Capital (or net assets)
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What is the process of formally recording and reporting an element in the financial statements?
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recognition
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What 4 ways are things recognized by the balance sheet according to SFAC #5?
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1. must meet the definition of an element 2. must be measurable 3. must be relevant 4. must be reliable
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What are probable future economic benefits obtained or controlled by a company as a result of past transactions or events. Primary attribute is service potential (the potential to benefit from this)?
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Assets
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What are probably future sacrifices of economic benefits arising from present obligations of a company (with little to no discretion to avoid) to transfer assets or provide services in the future as a result of past transactions or events?
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Liabilities
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What are residual interest in the assets of a company that remain after deducting liabilities?
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Stockholders' Equity
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What is the exchange price of the transaction in which the asset was acquired. Primarily used to value "non financial" assets and liabilities?
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Historical cost
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What is the amount of cash (or equivalent) that could be obtained on the date of the balance sheet by selling the asset in an orderly liquidation. It may be used to value "financial" assets and liabilities?
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Fair Value (exit value)
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What is level 1 for the hierarchy of valuation method?
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Quoted price for identical asset (or liability) in active market
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What is level 2 for the hierarchy of valuation method?
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Adjusted quoted price (exit value) for similar asset (or liability
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What is level 3 for the hierarchy of valuation method?
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Unobservable inputs (PV of expected cash flows)
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What is the use of market multiples?
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market approach
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What is the PV of future earnings or cash flows?
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Income Approach
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What is the current cost or current replacement cost?
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Cost Approach
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What is set aside for emergencies?
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Restricted Cash
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What are long term liabilities measured by?
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net present value
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What will converted to cash or used in operations within one year or operating cycle, whichever is longer (an operating cycle is the time it takes to purchase inventory, produce a product or service, complete the sale, and collect the cash)?
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Current Assets
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What includes cash and cash equivalents (maturities < 3 months, e.g., T-Bills, money market funds) that are unrestricted, valued at current market value?
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Cash
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What are trading and available for sale portfolios (including CDs), valued at current market value at the balance sheet date?
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Short-Term Investments
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What are accounts receivable, post-dated checks, rent receivables, etc.; valued at net realizable value (i.e., gross accounts receivables less allowance for uncollectible accounts)?
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Short-Term Receivables
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What are merchandise, raw materials, work in process, finished goods; valued at lower of cost or market, must disclose cost flow assumption/method (e.g., LIFO, FIFO, weighted/moving average, dollar-value LIFO)?
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Inventories
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What are insurance, rent, supplies; generally, valued at historical cost?
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Short-Term Prepaids
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What are presented in order of liquidity?
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Current Assets
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What are cash surrender value of life insurance policies?
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Other Miscellaneous Investments
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What are sinking funds, stock redemption funds, and plant expansion funds?
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Restricted Cash
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What is property valued at?
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lower cost of market
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What are plant and equipment valued at?
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lower of cost or market net of applicable depreciation
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What are natural resources valued at?
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lower of cost or market net of applicable depletion
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What are patents, franchises, computer software costs; valued at lower of cost or market net of amortization (must disclose assumptions)?
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Finite-life intangibles
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What are trademarks, valued at lower of cost or market?
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Indefinite-life intangibles
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What are valued at lower of cost or market that is a purchased intangible?
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Goodwill
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What are long-term prepayments (rent or insurance) deferred tax assets, prepaid pension costs, bond issue costs, idle fixed assets, assets of a discontinued component, customers' security deposits, assets leased to other parties, assets temporarily restricted by foreign countries?
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Other Assets
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What will be due within one year or operating cycle, whichever is longer?
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Current Liabilities
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What are valued at cost, plus accrued interest?
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Short-Term Payables
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What liabilities are valued at net present value?
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Short-Term Portion of Long-Term Debt
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What are valued at net present value (must disclose significant contract provisions and restrictions, maturities, and 5-year cash flow requirements)?
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Long-Term Liabilities
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What are deferred tax liabilities, liabilities of discontinued component?
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Other Liabilities
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What are stock and additional paid in capital accounts (must disclose the number of authorized, issued, and outstanding shares by class)?
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Continuous (Paid -In) Capital
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What relates to the legal capital (the minimum amount of stockholders' equity to be retained within the company)?
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Capital Stock
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What is capital in excess of the legal minimum to be retained within the company?
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Additional Paid-In Capital
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What is if applicable, must disclose free and appropriate amounts and the reason for appropriation?
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Retained Earnings
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What is portion of comprehensive, income not attributed to net income: unrealized gains/losses on available for sale securities, foreign currency translation adjustments, certain gains/ losses on derivatives and certain pension liability adjustments?
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Other Comprehensive Income
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Where do corporations disclose the changes in its stockholders' equity accounts?
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Statement of Changes in Stockholders' Equity
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Where do the disclosures appear for changes in stockholder's equity?
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a financial statement, a supporting schedule or a note to the financial statements
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APB Opinion No. 22 requires what be disclosed such as revenue recognition, basis for consolidation, depreciation and amortization methods, inventory cost methods also?
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Summary of Significant Accounting Policies
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What does FAS 107 require?
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that the FMV of all financial instruments (assets and liabilities) be disclosed whether or not they are reported on b/s
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What does FAS 133 require?
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derivative financial instruments be reported on the b/s (as either assets or liabilities) at FMV
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What is a condition that exists, at the end of the fiscal period, that gives rise to a possible loss to the company, the amount of which will be determined by a future event?
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Loss Contingencies
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What is a condition that exists, at the end of the fiscal period, that gives rise to a possible gain to the company, the amount of which will be determined by a future event?
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Gain Contingencies
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What are not recorded. They may be disclosed in the footnotes only when the probabilities are high that the gain will materialize. Care should be exercised with the footnote disclosure to avoid over optimism?
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Gain Contingencies
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What occur between a company's balance sheet date and the date the annual report is subsequently issued?
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Subsequent Events
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How many days do SEC registrants give to file form 10K?
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60, 75 or 90
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What type is if the event provides additional evidence about conditions that existed on the b/s date and significantly affects estimates within the f/s, the f/s must be adjusted, e.g., mgt. learns that an A/R is uncollectible, settlement of liability?
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Type 1
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What type is if the event provides evidence about conditions that did not exist on the b/s date, the f/s are not adjusted. Instead, the info. is disclosed elsewhere, e.g., fire or flood loss, stock or bond issuance, purchase of a business?
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Type 2
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What are details of transactions between the company and subsidiaries, managment, management's family, etc. must be disclosed (FASB statement No. 57?
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Related Party Transactions
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What are three years for income statement and two years for balance sheet?
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Comparative financial statements
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What are summary of financial data for previous five years?
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Selected Financial Data
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What offers management's perspective on the company and "forward-looking" information (narrative on how company did)?
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Managements Discussion and Analysis (MD&A)
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What are high and low stock prices by quarter for two years; number of stockholders; dividends paid and dividend restrictions?
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Common Stock Market Prices and Dividends
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What are the purposes of the income statemment?
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Evaluate management's past performance, help predict the company's future income and cash flows, help assess the company's credit worthiness, and help in comparisons with other companies
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What are inflows of (increase in) assets of a company or settlement of its liabilities during a period from delivering or producing goods, rendering services, or other activities that are the company's ongoing major or central operations?
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Revenues
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What are outflows of (decrease in) of a company or incurrences of liabilities during a period from delivering or producing goods, rendering services, or carrying out other activities that are the company's ongoing major or central operations?
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Expenses
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What are increases in the equity (net assets) of a company from peripheral or incidental transactions, and all other events and circumstances during a period, except those that results from revenues or investments by owners?
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Gains
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What are decreases in the equity (net assets) of a company from peripheral or incidental transactions, and all other events and circumstances during a period, except those that result from expenses or distributions to owners?
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Losses
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When is revenue recognized?
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When Realized (an exchange has occurred) and earned (the earnings process is complete or essentially complete) usually when goods are sold or services are provided.
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What is an example of percentage-of-completion?
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Certain L-T contracts
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What is an example of proportional-performance?
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Certain L-T service contracts
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What is an example of an installment?
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collectibility of receivable is very uncertain
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What is an example of a cost recovery?
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Collectibility of receivable is extremely uncertain
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What are the three ways expenses should be recognized?
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Association of cause and effect, systematic and rational allocation, and immediate recognition
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What is presumed to be directly related to specific revenues (COGS, sales commission)?
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Association of cause and effect
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What is to allocate among periods in which benefits are provided (depreciation, allocation of prepaid costs)?
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Systematic and rational allocation
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What is recognize in current period (Mgt. salaries, R & D costs, SG & A costs)?
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Immediate Recognition
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What are the three categories of gain/loss recognition?
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Exchange transaction, holding of resources or obligations while their values change, and nonreciprocal (i.e., "one way") transfers between a company and nonowners
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What are the 5 steps to Income Statement Content?
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Income from continuing operations, Results from discontinued operations, Extraordinary items(net of income taxes), Net income, Earnings per share
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What are the two acceptable formats for presenting income from continuing operations?
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Multiple-step format and Single-step format
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What involves operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the company (e.g., subsidiary, division)?
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A component
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To be classified as an extraordinary item, the event or transaction must meet what two criteria?
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Unusual in nature and Infrequent in occurrence
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What is the underlying event or transaction possesses a high degree of abnormality and is of a type clearly unrelated to, or only incidentally related to, the ordinary and typical activities of the company?
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Unusual in Nature
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What is the underlying event or transaction is of a type that is not reasonably expected to recur in the foreseeable future?
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Infrequent in occurrence
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Must report basic and diluted earnings per (common) share for what?
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Income from continuing operations, net income, discontinued operations, and extraordinary items
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What considers the (numerator & denominator) effect of securities that may be converted into shares of common stock in the future (convertible preferred stock, convertible bonds, stock options)?
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Diluted EPS
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What are examples of change in accounting estimates?
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changes in estimates of uncollectible accounts, inventory obsolescence, depreciation, amortization and depletion assumptions (useful life and salvage values), and Warranty costs
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Where is the effect of change in accounting estimate on current year's income disclosed?
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Footnotes
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What reconciles the beginning and ending retained earnings account balance?
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Statement of Retained Earnings
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What are two primary types of retrospective adjustments?
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change in accounting principle and correction of an error
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Correction of errors made in previous periods are adjustments to what?
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balance sheet accounts and the opening balance of Retained Earnings
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What three ways does FASB require companies to report their comprehensive income (or loss) for the period in a major financial statement?
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1. on the face of the income statement 2 in a separate statement of comprehensive income 3. in a statement of changes in stockholders equity
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What is comprehensive income comprised of?
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net income and other comprehensive income
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What are activities related to the earnings process?
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cash flows from operating activities
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What are activities related to acquiring and selling long-term investments, acquiring and selling property, plant, and equipment, and lending money and collecting on loans?
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cash flows from investing activities
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What are activities related to obtaining and disbursing resources from and to owners and repaying the amounts borrowed?
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cash flows from financing activities
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What are collections from customers and interest and dividends collected?
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Operating cash inflows
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What are payments to suppliers and employees, payments of interest, and payments of income taxes?
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Operating cash outflows
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