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Test your basic knowledge |
Advanced Financial Reporting And Analysis
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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. Management turnover.
To investigate the stability of that structure - Kilgore would be best served by looking at...
Measurement of A & L disclosure in footnotes
IFRS/US GAAP Frameworks: underlying assumptions...
Antidilutive Securities
2. Required by IFRS - Permited by US GAAP
Unusual OR Infrequent items...
Form 8-K...
Financial Ratios based on B/S: Solvency (Coverage)
Component depreciation;
3. 1) fair presentation; 2) going concern; 3) accrual basis; 4) consistency; 5) materiality
Fundamental principles for PREPARING f/s under IFRS: (IAS No 10
Market Value (GAAP)...
Types of accounting changes: accounting estimate
Extended DuPont Equation...
4. Both: Broadly consistent - lack fully developed concepts - FASB: Assets revaluations prohibited (except some financial instruments)
Taxation: Income Tax Expense
Intercorporate Investment: 20% - 50% votes...
Balance Sheet - formats
IFRS/US GAAP Frameworks: Measurement of Elements...
5. Under GAAP 1) Purchased patentes - copyrights - franchises - licenses - brands - and trademarks 2) Direct response advertising 3) Goodwill arising from transactions - (Proceeds - FMV net assets required = goodwill) 4) Software development costs once
Fraud Triangle
Capitalized Intangibles...
Creative Cash Flows Accounting: Motivation
Financial Assets: US GAAP/Amortized at Cost
6. EU & US 1) Int'l Org. of Securities Commission; 2) Goal: uniform regulation; 3) Core objectives: Protecting investor - Fair - transparent - efficient markets - Reduction of systematic risk
Intercorporate Investment: 20% - 50% votes...
IOSCO
Inventory mangement: Low T/O (High DOH)...
Sustainable Growth
7. Lost sales from stock outs
Cash Flow From Operations (CFO) - IFRS
Free Cash Flow to Equity - FCFE
Inventory mangement: High T/O (low DOH) and sales growth below industry average
Funded Status US GAAP & IFRS
8. 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)
Extended DuPont Equation...
Financial Ratios based on B/S: Solvency (Coverage)
The 4 Qualitative Characteristics of FASB...
Simple capital structure
9. Both: purpose is to assist development & revision of accting stds - IASB: Firms must consider framework if no std exists - FASB: No express requirement to consider framework
CFO Disclosure requirement...
The 4 Qualitative Characteristics of IFRS
Which set of accounting standards requires firms to disclose estimated amortization expense for the next five years on intangible assets?
IFRS/US GAAP Frameworks: purpose of framework
10. FASB: No discussion of 'probables' - IASB: Asset - liabilities - are probable flows
Impact on the B/S of a Zero Coupon Bond...
IFRS/US GAAP Frameworks: Recognition of Elements...
Analyzing Effective Tax Rate Reconciliation
What is the economic substance of financial (capital) lease?
11. Depreciation exp = (cost-residual value)/ useful life
DTA Issues
Straight-line depreciation (SL)
Impact on the B/S of a Premium Bond...
Traditional DuPont Equation...
12. 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.
Complex Capital Structure
Motivation to Overstate Assets/Understate Liabilities
Financial Ratios based on B/S: Solvency ratio
IFRS/US GAAP Frameworks: objective of F/S
13. 1) installment sales (If collection is certain - rev is recognized at time of sale) 2) installment method: (if collection cannot be estimated) 3) cost recovery (if collectability is highly uncertain)
Income Tax Paid...
Sales Basis Revenue Recognitions
Impact on the B/S of a Zero Coupon Bond...
Activity Based Restrictions
14. Carrying amount of the liability minus the amount that will be deductible in the future.
Defined Benefit Plans
Financial Liability: US GAAP/Amortized at Cost
FIFO results in: (assuming inflationary period)
Tax base on a liability
15. 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)
Add/ Sub changes to related b/s operating accounts
IFRS/US GAAP Frameworks: underlying assumptions...
Which of the following characteristics should be of least concerned about management's opportunities to commit fraud?
Stock options: Use treasury stock method
16. 1) Show each item as a % of Net Revenue 2) Show each inflow as a % of total inflows 3) Show each outflow as a % of total outflow
Statement of Cash Flow - relevance...
Common Size Statement
IFRS: Required F/S
Funded status of the pension plan (under US GAAP & IFRS) is reported where?
17. Employer contributes specific % - No guarantee on future benefits - Employee bears investment risk - Pension expense = employer contribution
Defined Contribution Plans
Financial Implications of Capitalizing...
Fraud Triangle
B/S - Long-term Liabilities
18. 1) Evaluating equity investments for a portfolio; 2) Evaluating potential M&A; 3) Evaluating a subsidiary of a parent company; 4) Deciding on private equity/ venture cap investment 5) Determine creditworthiness - borrowing; 6) Extending credit to
Roles of financial reporting & analysis include...
Cash Conversion Cycle =
Diluted EPS
Dilutive Securities
19. (GAAP) Internally created intangibles 1) (R&D) are expensed 2) Advertising 3) Software (developed to establish feasibility)
Taxation: Income Tax Expense
Taxation Analyst Adjustments...
days of sales o/s =
Expensed Intangibles...
20. 1) Risk & Reward transferred; 2) No continued control; 3) Reliable measurement; 4) Probable flow of benefits; 5) Cost verifiable
Financial Implications of Capitalizing...
IFRS Revenue Recognition
FIFO results in: (assuming inflationary period)
Balance Sheet - formats
21. 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
One major difference between the presentation of deferred tax assets and liabilities under IFRS and under U.S. GAAP is that...
Units of Production Method
Effects of Lease Classification on F/S - Finance Lease
Revaluation below historic cost...
22. GAAP: shown as a separate prepaid asset and amortized - IFRS: Deducted from proceeds and liability therefore effective interest rate is HIGHER under IFRS than GAAP.
Antidilutive Securities
Analyst Treaments of DTL
Financial Assets: US GAAP/Fair Market Value
Bond Issuance Cost under GAAP/IFRS
23. 1) Evidence of an arrangement; 2) Completion of earnings process; 3) Price is determined or determinable; 4) Assurance of payment
Financial Ratio based on I/S...
SEC guidance for Revenue Recognition
FASB
Net Periodic Benefit Costs
24. Interest expense = Coupon rate
Revaluation above historic cost...
Impact on the B/S of a Par Bond...
Effects of Lease Classification on F/S - Finance Lease
Motivation to Understate Assets/Overstate Liabilities
25. To improve liquidity and leverage ratios
Sales Basis Revenue Recognitions
Impact on the B/S of a Zero Coupon Bond...
Taxation Analyst Adjustments...
Motivation to Overstate Assets/Understate Liabilities
26. EBIT/ Avg. total capital - Total capital includes: debt capital - so int. is aded back to NI
Which set of accounting standards requires firms to disclose estimated amortization expense for the next five years on intangible assets?
IASB
Impact on the B/S of a Discount Bond...
Return on total capital (ROTC)...
27. 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
Segment Reporting
Motivation to Overstate Assets/Understate Liabilities
FASB - Harmonization
Not all CF increase are Sustainable. Example of how Mgmt can Manipulate Cash Flow Statement
28. 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
Taxation: Tax Payable
Implication for Analysts: Be aware of differences in tax reconcilation between periods
IFRS: Presentation Requirements
Calculate dividends declared...
29. Assets held for continuing usage in the business NOT for resale ( Invoice price - Sales Tax - Freight & Insurance - and Installation costs) 1) capitalize costs that result in higher future earnings 2) expense costs that have uncertain/NO impact on fu
Tax base on a liability
Potentially Dillutive Securities
Asset Capitalization
Cash Flow From Operations (CFO) - FASB
30. Unlisted instruments - Held-to-maturity investments - Loans - Receivables
Financial Ration based on B/S: Liquidity Ratios
Depreciation Methods...
Financial Assets: US GAAP/Amortized at Cost
Return on total capital (ROTC)...
31. PV of future obligation or the PV of the amount owed to employees for future pension benefits earned to date - Payments are determined based on expected final salary.
Amortization of Bond Premium = (in/out flow) in the indirect method CFO
IFRS/US GAAP Frameworks: purpose of framework
Component depreciation;
Defined Benefit Obligations (DBO)
32. 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
Impact on the B/S of a Premium Bond...
Measurement of A & L disclosure in footnotes
Financial Implications of Capitalizing...
One major difference between the presentation of deferred tax assets and liabilities under IFRS and under U.S. GAAP is that...
33. 1) Lack physical form (patent - copyrights etc; 2) Good will is an ex. of an unidentifiable intangible asset - not amortized but subject to annual impairment reviews; 3) Identifiable intangibles are amortized.(eliminate goodwill from ratio analysis)
Sales Basis Revenue Recognitions
Intangible Assets
Footnote disclosure of Reconciliation of opening and closing carrying values...
Income Tax Paid...
34. 1) Unqualified opinion (good); 2) Qualified opinion (followed GAAP except for...); 3) Adverse opinion (bad)
Financial Assets: US GAAP/Amortized at Cost
Auditor/Audit Opinion
Impact on the B/S of a Zero Coupon Bond...
IFRS Revenue Recognition For Service
35. If any ONE out of the FOUR are met must be classifed as Financial Lease: 1) Title transfered to lessee at the end of lease; 2) Bargain purchase option at the end of the lease; 3) Lease period is at least 75% of asset's useful life; 4) The PV of least
Finance (capital) Lease criteria (under US GAAP)
Amortization of Bond Premium = (in/out flow) in the indirect method CFO
Effects of Lease Classification on Ratios - Operating Lease
DTA/DTL: Effect on Net Income when Tax Rate decreases...
36. Improve ROA and Asset TO Ratios - Report higher aquisition goodwill
Motivation to Over-report Earnings
Motivation to Understate Assets/Overstate Liabilities
Impact on the Cash Flow of a Premium Bond...
Financial Lease Reporting
37. Both: Recognize going concern & accrual assumptions - IASB: Going concern & accruals given more prominence in framework - FASB: Going concern assumption not well developed in framework.
IFRS/US GAAP Frameworks: underlying assumptions...
Measures of Operating Performance - Efficiency Ratios...
IFRS/US GAAP Frameworks: Recognition of Elements...
Fraud Triangle - 1) Incentive/Pressure
38. Inflow - (bringing bond UP to par)
Financial Liability: US GAAP/Amortized at Cost
Ending Inventory =
Operating Lease
Amortization of Bond Discount = (in/out flow) in the indirect method CFO
39. You.S. GAAP
MD&A contains...
Convergence IFRS/US GAAP...
Which set of accounting standards requires firms to disclose estimated amortization expense for the next five years on intangible assets?
IFRS/US GAAP Frameworks: objective of F/S
40. 1) Purpose and context 2) Data Collection 3) Data Processing 4) Analysis/Interpretation of data 5) Develop conclusions and recommendations 6) Follow-up
FIFO is appropriate
Intercorporate Investment: 20% - 50% votes...
Tax Loss Carryforward...
Steps of F/S Analysis
41. 1st: Net Income - dividends declared = chg in are/E - Then: Dividends declared +/- chg dividends payable = cash dividends paid.
Cash Flow From Operations (CFO) - FASB
Auditor/Audit Opinion
Calculate dividends declared...
IOSCO
42. Income Tax Expense/Pretax Income (EBIT) Income Tax Exp. = Taxes payable + chg in deferred ta
Creative Cash Flows Accounting: Technique
Inventory mangement: High T/O (low DOH) and sales growth below industry average
Sarbanes-Oxley Management Report...
Effective Tax Rate
43. Efficient inventory managment
Operating vs. Non-operating Income
Net Realizable Value (NRV) (IFRS)
Inventory mangement: High T/O (low DOH) and sales growth above industry average
Sales Basis Revenue Recognitions
44. All other liabilities (e.g. bonds - notes payables - leases)
Financial Liability: US GAAP/Amortized at Cost
Double-decline balance (DDB)
Types of accounting changes: accounting estimate
Intangibles under IFRS...
45. Nonreversal DTL - therefore it is permanent = Equity. therefore decrease in DTL = Increase in Equity - Reversal DTL - therefore it is temp = Liability
Taxation Analyst Adjustments...
Lessor Accounting Capital Lease: Sales: Direct Financing Lease
Discontinued Operations...
Asset Capitalization
46. Refers to change in mgmt judgement Does NOT require restatement of prior pd earnings; Disclose in footnotes
Footnote disclosure of Reconciliation of opening and closing carrying values...
Financial Ratio based on I/S...
B/S - Long-lived assets
Types of accounting changes: accounting estimate
47. ROE = (NI/Sales) x (Sales/Assets) x (Assets/Equity) or ROE= Net Profit Margin x Asset TO x Leverage Ratio
Unusual OR Infrequent items...
Traditional DuPont Equation...
Which of the following characteristics should be of least concerned about management's opportunities to commit fraud?
IFRS/US GAAP Frameworks: purpose of framework
48. Follows the traditional ledger account - assets on the left hand side and liabilities and equity on the right hand side.
Fraud Triangle - 1) Incentive/Pressure
Cash Flow From Financing (USA) (Source of Cash)
Which of the following characteristics should be of least concerned about management's opportunities to commit fraud?
The account format of B/S
49. Potentially dilutive securitites [options - warrants - convertible securities]
IFRS: Required F/S
Inventory mangement: Low T/O (High DOH)...
Complex Capital Structure
Tax base of an asset
50. NRV = Est. selling cost - Est. cost of complition - selling costs
Net Realizable Value (NRV) (IFRS)
Disclosure for each segment...
Cash flow ratios
FASB