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. CFO: cash interest expense - CFF: increased by amount rcvd at issuance and decreased by payment made at redemption
Impact on the Cash Flow of a Par Bond...
Sources of Differences betweent F/S & T/
Fundamental principles for PREPARING f/s under IFRS: (IAS No 10
Tax base of an asset
2. When a company prepares a proxy statement for its shareholders prior to the annual meeting or other shareholder vote - it also files the statement with the SEC as Form DEF-14A.
Bond Issuance Cost under GAAP/IFRS
Form DEF-14A...
Cost recovery method...
Forecasting Financial Performance: Top Down Approach...
3. Adjustments Involves erros or new accounting standards - Resate prior period - Disclose nature and effect on NI - Errors may indicate weakness in internal controls
Operating vs. Non-operating Income
Types of accounting changes: prior period adjustments
IFRS Revenue Recognition
Fraud Triangle - 1) Incentive/Pressure
4. 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
Income Statement
Ratios that directly affect choice of Inventory Account...
Fraud Triangle - 3) Attitude/rationalization
Cash Flow: Logic (A = L + E)
5. LIFO after-tax profit + (change in LIFO reserve)(1 - t)
Financial Lease Reporting
Types of accounting changes: accounting principle
FIFO after-tax profit =
Tax Loss Carryforward...
6. GAAP: direct method must disclose adj to reconcile NI to CFO. reconciliation is NOT required for IFRS. IFRS: pymts for Int & Taxes MUST be disclosed separately in the CF Stmnt under direct or indirect. Under GAAP - this can be reported in CF stmnt or
Tax Loss Carryforward...
Revaluation above historic cost...
CFO Disclosure requirement...
LIFO is appropriate
7. Actual cash outflow for taxes paid during current period
Cost included in Inventory on b/s...
Traditional DuPont Equation...
Sources of Differences: Permanent
Income Tax Paid...
8. Interest Expense = Amortization
Impact on the B/S of a Zero Coupon Bond...
Discontinued Operations...
Cash Flow From Financing (USA) (Source of Cash)
Inv. Valuation reporting Inventory ABOVE costs...
9. Follows the traditional ledger account - assets on the left hand side and liabilities and equity on the right hand side.
The account format of B/S
Convergence IFRS/US GAAP...
Segment Reporting
Diluted EPS
10. 1) Basis for measurement; 2) carrying value of inventory by category; 3) Amount of inventory carried at FV less cost to sell 4) Write-downs & reversals (discussion of circumstance that led to reversal); 5) Inventories pledged as collateral for liabil
Auditor/Audit Opinion
B/S - Long-term Liabilities
Measurement of A & L disclosure in footnotes
Activity Ratios
11. 1) Intention to hold >1 year (e.g. debt or equity) valued @ cost or mkt value 2) Equity accounted investments
IFRS: Required F/S
Stock options: Use treasury stock method
B/S - investments
Activity Based Restrictions
12. Pd after more than 1 year - notes & bonds: at PV of future CF pymets - Capital leases - Provisions - Deferred tax
IASB - Goals
FIFO results in: (assuming inflationary period)
B/S - Long-term Liabilities
Installment Method...
13. Profit recognized is the proportion of cash collected x total expected profit Revenue = (COG provided to date/total COG to be provided) x total expected revenue
Defined Benefit Obligations (DBO)
Gross Reporting of Revenue
DBO Funded Status =
Installment Method...
14. FASB: No discussion of 'probables' - IASB: Asset - liabilities - are probable flows
IFRS/US GAAP Frameworks: Recognition of Elements...
FASB - Harmonization
Financial Liability: US GAAP/Amortized at Cost
Tax base of an asset
15. Higher share price - Lower borrowing cost - Higher incentive compensation
Creative Cash Flows Accounting: Motivation
Impact on the Cash Flow of a Premium Bond...
Discontinued Operations...
Effects of Lease Classification on F/S - Operating Lease
16. 1) Start with NI 2) Sub Gains or add losses from financing or investing CFs 3) Add non-cash charges (depr't & amort'z) & sub all non cash revenue 4) Add/ Sub changes to related b/s operating accounts:
Taxable Income
Discontinued Operations...
Amortization of Bond Discount = (in/out flow) in the indirect method CFO
CFO - Indirect method steps...
17. Derivatives - Non-derivative investments with fair value exposure hedged by derivatives
LIFO is appropriate
ROE interpretation: if ROE is low...
Financial Liability: US GAAP/Fair Market Value
Taxation Analyst Adjustments...
18. Income Tax Expense > Taxes Payable - F/S > Tax Return - Pay less tax now but more on reversal
Deferred Tax Liability: (DTL)
Intangible Assets
Types of accounting changes: prior period adjustments
Capitalized Intangibles...
19. Financial Services Companies: Operating activities: Interest - Dividends - G/(L) on disposal Non-Financial Services Companies: Non-operating activities: Interest - Dividends - G/(L) on disposal
# of days payable =
Fraud Triangle - 1) Incentive/Pressure
Double-decline balance (DDB)
Operating vs. Non-operating Income
20. Is required under IFRS but not under GAAP
Footnote disclosure of Reconciliation of opening and closing carrying values...
IASB - Goals
Fraud Triangle
IOSCO
21. ROE = (NI/EBT)x(EBT/EBIT)x(EBIT/Rev)x(Rev/Asset)x(Asset/Eqty) or (tax burden)x(int. burden)x(EBITmargin)x(Aset TO)x(Fin Lvg)
Revaluation below historic cost...
Effective Tax Rate
Extended DuPont Equation...
Net Realizable Value (NRV) (IFRS)
22. Income Tax Expense/Pretax Income (EBIT) Income Tax Exp. = Taxes payable + chg in deferred ta
IFRS: Required F/S
Free Cash Flow -CFO
Under Completed Contract Method...
Effective Tax Rate
23. 1) Timing Differences: Accrual vs. modified cash accounting - Differences in reporting methods estimates
Sources of Differences: Temporary
Tax base of an asset
Funded Status US GAAP & IFRS
Balance Sheet - formats
24. 1) Diff tax rate in diff. tax jurisdictions (countries) (continuous)2) Permanent tax differences: tax credit - tax-exempt income - nondeductible expenses - & tax diff between capital gains and operating income. (continuous) 3)in tax rates and legisl
Types of accounting changes: accounting estimate
The 4 Qualitative Characteristics of IFRS
Analyzing Effective Tax Rate Reconciliation
days of inv. on hand =
25. Exchange of goods or services between two parties (no cash) IASB: Revenue = FMV of similar non-barter transaction with unrelated parties FASB: Revenue = FMV only if the company has received cash payments for such services in the past
Debt covenants
Dilutive Securities
Impact on the Cash Flow of a Premium Bond...
Barter (IASB & FASB)
26. 365/(Inv. T/O) = 365/( COGS/ Avg. Inv.)
days of inv. on hand =
Implication for Analysts: Be aware of differences in tax reconcilation between periods
IASB - Goals
Activity Ratios
27. 1) fair presentation; 2) going concern; 3) accrual basis; 4) consistency; 5) materiality
Gross Reporting of Revenue
Fundamental principles for PREPARING f/s under IFRS: (IAS No 10
Units of Production Method
Impairments recognition (IFRS)
28. Ensure that information in f/s is useful to a wide range of users.
The objective of f/s is to...
Impact on the Cash Flow of a Par Bond...
Disclosure for each segment...
Warning Signs of Earnings Manipulation
29. CFO: cash interest expense - CFF: increased by amount rcvd at issuance and decreased by payment made at redemption - CFO is lower CFF is higher
Revaluation above historic cost...
Inventory Cost Flow Methods...
Impact on the Cash Flow of a Premium Bond...
3 C's for Credit Analysis...
30. Meet Analyst Expectations - Meet debt covenants - Incentive compensation
Motivation to Over-report Earnings
# of days payable =
FASB
Free Cash Flow to the Firm - FCFF
31. 1) Consider the growth rate and capital spending levels when determining whether temp diff due to accelerated depre will reverse 2) Look for cumulative differences due to asset impairments and post-retirement benefits 3) Restructuring charges can c
Implication for Analysts: Be aware of differences in tax reconcilation between periods
Simple capital structure
Operating Risk Ratios...
Sources of Differences: Temporary
32. Employer contributes specific % - No guarantee on future benefits - Employee bears investment risk - Pension expense = employer contribution
Defined Contribution Plans
Cash Flow From Financing (USA) (Source of Cash)
CFO - Direct method
B/S - short-term investments
33. FASB & IASB -LT projects under contract - reliable estimates of revenue - cost and completion time -Rev - exp and profit are recognized in proportion to total cost incurred to date - divided by total expected cost.
Inventory Systems...
Financial Lease Reporting
Form 8-K...
% of Completion
34. 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.
CFI Analysis...
Cash Flow From Financing (USA) (Source of Cash)
Inv. Valuation reporting Inventory ABOVE costs...
Sources of Differences betweent F/S & T/
35. Aggressive Revenue Recognition - Diff. growth rates of operating cash flow and earnings - Abnormal comparative sales growth - Abnormal inventory growth as compared to sales - Moving nonoperating income and nonrecurring gains up to I/S to boost revenu
IFRS/US GAAP Frameworks: Recognition of Elements...
Warning Signs of Earnings Manipulation
days of sales o/s =
Taxable Income
36. Trade relief - Contingent consideration - Union concessions
Amortization of Bond Discount = (in/out flow) in the indirect method CFO
Net Realizable Value (NRV) (IFRS)
Motivation to Under-report Earnings
Taxable Income
37. Tax Rate down: DTL down -> Inc. Tax Exp down -> NI up - DTA down -> Inc. Tax Exp up -> NI down
Effects of Lease Classification on F/S - Operating Lease
DTA/DTL: Effect on Net Income when Tax Rate decreases...
Impairments recognition (IFRS)
Funded status of the pension plan (under US GAAP & IFRS) is reported where?
38. Management turnover.
CFO Analysis...
To investigate the stability of that structure - Kilgore would be best served by looking at...
B/S - short-term investments
Amortization of Bond Discount = (in/out flow) in the indirect method CFO
39. 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)
% of Completion
IFRS/US GAAP Frameworks: underlying assumptions...
CFO - Direct/Indirect method
Types of accounting changes: accounting estimate
40. Funds from Operations to debt = NI adj for non cash items/ total debt - Free operating CF to Total Debt = CFO - Capex / total debt - Total Debt to EBITDA = total debt / EBITDA - Return on Capital = EBIT / Capital - Total debt to total debt + equity =
Credit Analysis: Ratios
Revaluation below historic cost...
Finance (capital) Lease criteria (under US GAAP)
DTA/DTL: Effect on Net Income when Tax Rate decreases...
41. Stock options - Warrants - Convertible debt - Convertible preferred stock
Funded Status US GAAP & IFRS
Units of Production Method
Discontinued Operations...
Potentially Dillutive Securities
42. Change in equity from transactions from nonownership sources. Include: NI - chg in foreign currency translation adj. - chg in pension adj to funded status - chg unrealized gains/losses on derivatives contracts accounted for as hedges - chng in unrea
Comprehensive income...
Financial Assets: US GAAP/Fair Market Value
Inventory Valuatoin (LCM)
DTA/DTL: Effect on Net Income when Tax Rate decreases...
43. 1) Results of operations and discussions of trend; 2) Capital resources - liquidity - and cash flow trends; 3) General business overview based on known trends; 4) Effects of trends - events - and uncertainties; 5) Discontinued operations - extraordin
Auditor/Audit Opinion
Tax base of an asset
MD&A contains...
Defined Contribution Plans
44. 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
45. 1) Unqualified opinion (good); 2) Qualified opinion (followed GAAP except for...); 3) Adverse opinion (bad)
Motivation to Understate Assets/Overstate Liabilities
4 General Categories for Creditworthiness/Capacity...
Auditor/Audit Opinion
Taxable Income
46. If PV of min lease pymt < cost of asset 1) lessor is a dealer or seller of the leased equipment 2) at the time of lease inception - lessor recognized a gross profit on sale. (NI - are/E - and Assests are higher) 3) Interest rev recognized over period
MD&A contains...
Sources of Differences betweent F/S & T/
Lessor Accounting Capital Lease: Sales-Type Lease
Return on Equity (ROE)...
47. Efficient inventory managment
Analysis: Market Value of Debt
Inventory mangement: High T/O (low DOH) and sales growth above industry average
Trade-Offs Qualitative Characteristics of IFRS
Cash Flow From Operations (CFO) - FASB
48. To improve liquidity and leverage ratios
Impact on the Cash Flow of a Par Bond...
Motivation to Overstate Assets/Understate Liabilities
Taxable Income
Debt covenants
49. Net income + non-cash charges - working cap investment
Free Cash Flow -CFO
Analysis: Market Value of Debt
Amortization of Bond Premium = (in/out flow) in the indirect method CFO
Valuation Allowance...
50. Total assets TO = Revenue/Avg. total asset - Fixed asset TO = Revenue/ Avg. net fixed assets - Working Cap TO = Revenue/Avg. working captial
Financial Assets: US GAAP/Fair Market Value
Add/ Sub changes to related b/s operating accounts
Measures of Operating Performance - Efficiency Ratios...
Financial Implications of Capitalizing...