SUBJECTS
|
BROWSE
|
CAREER CENTER
|
POPULAR
|
JOIN
|
LOGIN
Business Skills
|
Soft Skills
|
Basic Literacy
|
Certifications
About
|
Help
|
Privacy
|
Terms
|
Email
Search
Test your basic knowledge |
Advanced Financial Reporting And Analysis
Start Test
Study First
Subject
:
business-skills
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. IFRS: Funded status is NOT on B/S Asset/Liability - Result in a b/s that does NOT represent econ reality - GAAP: Funded status = B/S Asset/Liability -Both disclose components of DBO - plan assets - expenses - and assumptions used to calculate pensio
Return on total capital (ROTC)...
Add/ Sub changes to related b/s operating accounts
Funded Status US GAAP & IFRS
Effects of Lease Classification on Ratios - Finance Lease
2. NRV = Est. selling cost - Est. cost of complition - selling costs
Barter (IASB & FASB)
Units of Production Method
Net Realizable Value (NRV) (IFRS)
Analyst Treaments of DTL
3. All DTA and DTL are classified as noncurrent under IFRS - Under U.S. GAAP - deferred tax assets and liabilities are classified as current or non-current according to the classification of the underlying asset or liability. Under IFRS - deferred tax a
Cost recovery method...
Fraud Triangle - 1) Incentive/Pressure
Analyzing Effective Tax Rate Reconciliation
One major difference between the presentation of deferred tax assets and liabilities under IFRS and under U.S. GAAP is that...
4. 1) fair presentation; 2) going concern; 3) accrual basis; 4) consistency; 5) materiality
Calculate dividends declared...
IFRS Revenue Recognition
Fundamental principles for PREPARING f/s under IFRS: (IAS No 10
Steps of F/S Analysis
5. 1) SL; 2) Double Decline balance (accelerated); 3) Units of production; 4) Tax code perscribed Modified Accelerated Cost Recovery System (MACRS)
Depreciation Methods...
days of sales o/s =
DBO Funded Status =
CFO Disclosure requirement...
6. Cash Flow available for distribution to all investors (stockholders & debt holders) CFO + int(1-t) - fixed capital investment or [FCFF calculated from NI = NI + noncash charged + (Int exp(1-tax rate) - net cap investment - working capital invt.]
Capitalized Intangibles...
Cash flow ratios
CFO - Direct method
Free Cash Flow to the Firm - FCFF
7. 'Equity' -Chg in debt - Cash raised from equity and debt - -Chg in c/s - Cash spent on repurchasing equity or redeeming debt -Dividends paid - Calculate dividend declared: NI -*Div.Declared = chg in are/E - Div. Declared +(-) chg in div. payable = c
Lessor Accounting Capital Lease: Sales: Direct Financing Lease
B/S - Stockholders' Equity
Cash Flow From Operations (CFO) - FASB
Cash Flow From Financing (USA) (Source of Cash)
8. Both: General agreement on objectives; focus on wide range of users - IASB: One objective for all users - FASB: Separate objectives for business entities and non-business entities.
Convergence IFRS/US GAAP...
Impact on the B/S of a Par Bond...
IFRS/US GAAP Frameworks: objective of F/S
4 General Categories for Creditworthiness/Capacity...
9. Increase in an asset: deduct (use of cash) - Increase in a liability: add (source of cash) - Decrease in an asset: add (source of cash) - Decrease in a liability: deduct (use of cash)
Creative Cash Flows Accounting: Motivation
CFO - Direct/Indirect method
# of days payable =
Impact on the B/S of a Premium Bond...
10. Shows the performance of the company over a reporting period.
Inv. Valuation reporting Inventory ABOVE costs...
Expensed Intangibles...
Revaluation above historic cost...
Income Statement
11. Off B/S asset or liability = Footnotes disclosure - Lease payments are expensed when due via I/S - Payments are CFO outflows
Double-decline balance (DDB)
Impact on the Cash Flow of a Par Bond...
Operating Lease
Revaluation below historic cost...
12. Tax liability based on taxable income as per TAX Report/RETURN
Operating Lease
Units of Production Method
Return on Assets ROA...
Taxation: Tax Payable
13. Derivatives - Non-derivative investments with fair value exposure hedged by derivatives
Taxation Analyst Adjustments...
Financial Liability: US GAAP/Fair Market Value
Valuation allowance
Cash Flow From Operations (CFO) - FASB
14. 1) Character: Mgmt reputation and history of repayment 2) Collateral: ability to pledge specific collateral reduces lender risk 3) Capacity: ability to replay debt. requires LT view of firms prospect.
Warning
: Invalid argument supplied for foreach() in
/var/www/html/basicversity.com/show_quiz.php
on line
183
15. Asset is impaired if carrying value > recoverable amount - One-step process 1) Compare carrying value to: recoverable amount = the greater of the two. a) Fair value - selling costs b) Value in use = (PV of future cash flow from cont. use) - Loss reve
Types of accounting changes: accounting estimate
Impairments recognition (IFRS)
Comprehensive income...
Creative Cash Flows Accounting: Motivation
16. Trading securities - Available-for-sale - Derivatives (standalone or embedded in non-derivative intrument) - Assets with fair value exposure hedged by derivatives
% of Completion
Return on Equity (ROE)...
Financial Assets: US GAAP/Fair Market Value
Inventory Systems...
17. Potentially dilutive securitites [options - warrants - convertible securities]
Complex Capital Structure
Extended DuPont Equation...
B/S - Long-lived assets
B/S - Stockholders' Equity
18. Ineffective corp. ethical values; non-financial managers invovled in selection of accounting principles/estimates; History of violation; Focus on stock price and earning trends; Commitment to unrealistic/aggressive forecasts; Failure to correct known
CFI Analysis...
Stock options: Use treasury stock method
Vertical Common Size Statements...
Fraud Triangle - 3) Attitude/rationalization
19. Small investment for div/capital gains purpose - If Secondary market: Held-to-maturity: Debt securities co intend to hold to maturity; Carried at Amortized cost. Available-for-sale: Sold to satisfy Debt/Equity Needs; Currrent or non-current; B/S @ MV
IFRS/US GAAP Frameworks: Recognition of Elements...
B/S - short-term investments
Intercorporate Investment: < 20% votes...
The best indicator of overstating its profits is...
20. Higher share price - Lower borrowing cost - Higher incentive compensation
Funded Status US GAAP & IFRS
Motivation to Over-report Earnings
Creative Cash Flows Accounting: Motivation
Effective Tax Rate
21. Diff. in depreciation methods/assumptions; Diff. in inventory methods/assumptions; Diff. in treatment of the effect of exchg rate chgs; Diff. in classifications of investment securities - Goodwill: Internally Generated DON'T capitalize - Purchased =
B/S - Stockholders' Equity
Analyzing Effective Tax Rate Reconciliation
Operating Risk Ratios...
Financial Adj to Facilitate Comparison...
22. Efficient inventory managment
One major difference between the presentation of deferred tax assets and liabilities under IFRS and under U.S. GAAP is that...
Inventory mangement: High T/O (low DOH) and sales growth above industry average
Return on Equity (ROE)...
The 4 Qualitative Characteristics of FASB...
23. More than a third of Maxwell's total sales go to its own consolidated subsidiaries High levels of related-party transactions are worrisome - particularly when those parties are not audited. But transactions within the company between subsidiaries con
Warning
: Invalid argument supplied for foreach() in
/var/www/html/basicversity.com/show_quiz.php
on line
183
24. 1) Change in accounting principle; 2) Change in accounting estimate; 3) Prior period adjustments
Inventory Valuatoin (LCM)
Types of accounting changes: accounting principle
Amortization of Bond Premium = (in/out flow) in the indirect method CFO
Types of accounting changes...
25. Current Ratio (CA/CL): Higher - Work. Cap (CA -CL): Higher - Asset TO: (Sales/TA): Higher - ROA (EAT/TA): Higher - ROE (EAT/E): Higher - Debt/Equity: Lower - Understates Leverage ratios (b/c not recognized as a liability) - Overstates Coverage ratios
Implication for Analysts: Be aware of differences in tax reconcilation between periods
Revaluation below historic cost...
Effects of Lease Classification on Ratios - Operating Lease
Inventory mangement: Low T/O (High DOH)...
26. For inventory that does not deteriorate with age.
Financial Liability: US GAAP/Amortized at Cost
Stock options: Use treasury stock method
% of Completion
LIFO is appropriate
27. 1) Nature of industry/entity operations: 3rd party transactions; Power of customer/supplier; Acct est subjective; Unusual transactions; International operations; International operations; Operations in tax havens. 2) Opportunity complex/unstable org.
Roles of financial reporting & analysis include...
Fraud Triangle - 2) Opportunity
# of days payable =
Implication for Analysts: Be aware of differences in tax reconcilation between periods
28. 1) Evidence of an arrangement; 2) Completion of earnings process; 3) Price is determined or determinable; 4) Assurance of payment
Installment Method...
Sources of Differences: Permanent
IFRS/US GAAP Frameworks: Recognition of Elements...
SEC guidance for Revenue Recognition
29. Depreciation exp = (cost - accum depre)/useful life x 2 - Does NOT use residual value but depreciation stops when residual value has been reached - reduce EBIT - NI - Assets - Equity and decrease ROA & ROE
Stock options: Use treasury stock method
Component depreciation;
Double-decline balance (DDB)
An Increase in the Valuation Allowance Account...
30. FASB: No discussion of 'probables' - IASB: Asset - liabilities - are probable flows
Market Value (GAAP)...
Expensed Intangibles...
IFRS/US GAAP Frameworks: Recognition of Elements...
MD&A contains...
31. Is more relevant than book value: Recent changes allow more liability to be recorded at FMV (IFRS & GAAP require disclosure of FMV) - Downward adj. in liability will Increase equity and decrease leverage ratio - Upward adj in liability will decrease
Financial Ratios based on B/S: Solvency (Coverage)
Analysis: Market Value of Debt
Net Realizable Value (NRV) (IFRS)
MD&A contains...
32. Held for continuing use within the business (not for resale) 1) investment property; 2) Assets held for sale; 3) Natural resources; 4) PP&E
B/S - Long-lived assets
Screening for Potential Equity Investment: Criteria
Impairments recognition (GAAP)
Diluted EPS
33. Net income + non-cash charges - working cap investment
Tax base on a liability
Inventory Valuatoin (LCM)
Free Cash Flow -CFO
CFO - Direct method
34. Shows only the difference between sales and cost of goods sold Users are usually: 1) internet-based merchandising companies; 2) Sell prodict but never hold inventory; 3) Arrangement for supplier to ship directly to end customer. Discolsure policies
Comprehensive income...
Net Reporting of Revenue
B/S - Long-lived assets
DBO Funded Status =
35. EU 1) Int'l Accounting Standards Board; 2) Unified int'l frameworks of accounting standards (IFRS); 3) Addopted by EU in 2005
Effects of Lease Classification on F/S - Operating Lease
Amortization of Bond Premium = (in/out flow) in the indirect method CFO
Defined Benefit Obligations (DBO)
IASB
36. Increasing CFI - may indicate growth OR Decreasing CFI or sell capital assets to conserve or generate cash.May result in higher outflows in the future as older assets are replaced or growth conts.
Valuation Allowance...
CFI Analysis...
One major difference between the presentation of deferred tax assets and liabilities under IFRS and under U.S. GAAP is that...
Reasons to Lease...
37. Improve ROA and Asset TO Ratios - Report higher aquisition goodwill
Defined Benefit Plans
Motivation to Understate Assets/Overstate Liabilities
Barter (IASB & FASB)
Net Realizable Value (NRV) (IFRS)
38. 1) held-to-maturity: @ amortized cost (i.e Bonds) 2) trading: @ fair value through P&L @ fair mkt value - unrealized g/(l) are recognized on the I/S. 3) available-for-sale: @ fair mkt value - unrealized g/(l) are NOT recognized on the I/S - instead r
Taxation: Tax Payable
B/S - short-term investments
Net Realizable Value (NRV) (IFRS)
Implication for Analysts: Be aware of differences in tax reconcilation between periods
39. 1) Timing Differences: Accrual vs. modified cash accounting - Differences in reporting methods estimates
IFRS/US GAAP Frameworks: F/S elements...
Sources of Differences: Temporary
Steps of F/S Analysis
Taxation Disclosure Requirements
40. (GAAP) Internally created intangibles 1) (R&D) are expensed 2) Advertising 3) Software (developed to establish feasibility)
Barriers to a single framework...
Component depreciation;
Expensed Intangibles...
Segment Reporting
41. 1) Transparency; 2) Comprehensiveness; 3) Consistency
FIFO results in: (assuming inflationary period)
Effects of Lease Classification on F/S - Finance Lease
Types of accounting changes...
Characteristics of an effective framework
42. 1) 3rd party pressure: 1) analyst/institutional expectations; 2) need to obtain finance; 3) listing requirements; 4) Debt covenants; 5) Transactions 2) Directors' Financial Position: 1) Equity interest; 2) Stock options; 3) Personal debt guarantees.
Fraud Triangle - 1) Incentive/Pressure
Form 8-K...
Taxation Analyst Adjustments...
Sales Basis Revenue Recognitions
43. Beginning Inv. (BI) + Purchases (P) = Available for Sale - Available for sale - COGS = Ending Inventory (EI)
DBO Funded Status =
Add/ Sub changes to related b/s operating accounts
Motivation to Understate Assets/Overstate Liabilities
Ending Inventory =
44. 1) if 50% of its revenue is earned externally 2) if a business area has at least 10% of a firm's: Revenue; or Operating profit; or Use of asset 3) Business and geographical segments
Fraud Triangle - 2) Opportunity
CFI Analysis...
Free Cash Flow to the Firm - FCFF
Segment Reporting
45. Any I/S subtotal is expressed a margin ratio (to revenues) - Gross profit margin = gross profit/ revenue - Net profit margin = Net Inc/revenue - Operating profit margin = EBIT/ revenue - Pre-tax margin = EBT/ revenue
% of Completion
Financial Ratio based on I/S...
B/S - Long-lived assets
Lessor Accounting Capital Lease: Sales-Type Lease
46. 1) Aggregation where appropriate; 2) No offsetting assets against liabilities or income against exp.; 3) Classifed B/S; 4) Minimum Info on face; 5) Minimum disclosure; 6) Comparative info.
Common Size Statement
Cash Flow From Investing (USA) (Assets)
Effects of Lease Classification on Ratios - Finance Lease
IFRS: Presentation Requirements
47. Delay Supplier pymt: boost CFO; review days' sales in AP; Financing of payables: use N/P to pay off AP; manipulate timing of CFO; Securitization of A/are: accelerates appearance of collection - boosts CFO; Tax benefit of stock options: lower tax paid
Creative Cash Flows Accounting: Technique
Barriers to a single framework...
Screening for Potential Equity Investment: Criteria
Net Realizable Value (NRV) (IFRS)
48. US Gaap: lower of cost or market value - (does NOT allow subsequent reverasals) - IFRS: lower of cost or NET realizable value - (allows subsequent reversals)
DTA Issues
Fundamental principles for PREPARING f/s under IFRS: (IAS No 10
Inventory Valuatoin (LCM)
Implication for Analysts: Be aware of differences in tax reconcilation between periods
49. 1) Valuation; 2) Standard setting; 3) Measurement
Barriers to a single framework...
Cash Flow From Investing (USA) (Assets)
Inv. Valuation reporting Inventory ABOVE costs...
An Increase in the Valuation Allowance Account...
50. 1) Incentive/Pressure (the motive to commit fraud) 2) Opportunity (exists with weak internal controls) 3) Attitude/rationalization (mindset that fraud is justified)
Financial Assets: US GAAP/Amortized at Cost
Fraud Triangle
FIFO is appropriate
Potentially Dillutive Securities