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Advanced Financial Reporting And Analysis

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






2. NRV = Est. selling cost - Est. cost of complition - selling costs






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






4. 1) fair presentation; 2) going concern; 3) accrual basis; 4) consistency; 5) materiality






5. 1) SL; 2) Double Decline balance (accelerated); 3) Units of production; 4) Tax code perscribed Modified Accelerated Cost Recovery System (MACRS)






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.]






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






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.






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)






10. Shows the performance of the company over a reporting period.






11. Off B/S asset or liability = Footnotes disclosure - Lease payments are expensed when due via I/S - Payments are CFO outflows






12. Tax liability based on taxable income as per TAX Report/RETURN






13. Derivatives - Non-derivative investments with fair value exposure hedged by derivatives






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.

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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






16. Trading securities - Available-for-sale - Derivatives (standalone or embedded in non-derivative intrument) - Assets with fair value exposure hedged by derivatives






17. Potentially dilutive securitites [options - warrants - convertible securities]






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






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






20. Higher share price - Lower borrowing cost - Higher incentive compensation






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 =






22. Efficient inventory managment






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

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24. 1) Change in accounting principle; 2) Change in accounting estimate; 3) Prior period adjustments






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






26. For inventory that does not deteriorate with age.






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.






28. 1) Evidence of an arrangement; 2) Completion of earnings process; 3) Price is determined or determinable; 4) Assurance of payment






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






30. FASB: No discussion of 'probables' - IASB: Asset - liabilities - are probable flows






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






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






33. Net income + non-cash charges - working cap investment






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






35. EU 1) Int'l Accounting Standards Board; 2) Unified int'l frameworks of accounting standards (IFRS); 3) Addopted by EU in 2005






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.






37. Improve ROA and Asset TO Ratios - Report higher aquisition goodwill






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






39. 1) Timing Differences: Accrual vs. modified cash accounting - Differences in reporting methods estimates






40. (GAAP) Internally created intangibles 1) (R&D) are expensed 2) Advertising 3) Software (developed to establish feasibility)






41. 1) Transparency; 2) Comprehensiveness; 3) Consistency






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.






43. Beginning Inv. (BI) + Purchases (P) = Available for Sale - Available for sale - COGS = Ending Inventory (EI)






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






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






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.






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






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)






49. 1) Valuation; 2) Standard setting; 3) Measurement






50. 1) Incentive/Pressure (the motive to commit fraud) 2) Opportunity (exists with weak internal controls) 3) Attitude/rationalization (mindset that fraud is justified)