Advanced Accounting Chapter 16

ALL the following characteristics: - it engages in business activities from which it earns revenues and incurs expenses - its operating results are regularly reviewed by the entity's chief operating decision maker - Discrete financial info is available

Operating Segment

Which of the following is not a purpose of the Securities Exchange Act of 1934?

To approve the securities of corporations that are to be traded publicly

Not every component of a business is necessarily an operating segment Examples:

- corporate headquarters - functional departments like R&D (cost centers)

Formation and meaningful utilization of an audit committee of the board of directors is required of publicly traded companies that are subject to the rules of which of the following?

New York Stock Exchange

Operating Segment Disclosures provide information about:

-different types of business activities in which an entity engages - different economic environments in which it operates

Companies must disclose the existence of a major if they comprise more than _% of consolidated revenues

10%

total external revenue reported by operating segments must constitute at least _% of total consolidated revenue

75%

What is a "non-accelerated filer"?

A company having a public float of less than $75 million

The SEC requires Form 8-K to be filed with the commission within four days after the end of the month in which a significant event transpired. However, financial statements accompany Form 8-K only under certain conditions. Which event requires financial statements to accompany Form 8-K?

A major business acquisition

Assuming that all other criteria regarding the issuing organization and its "security" are met, which one of the following is not a "security" under the jurisdiction of the SEC?

A municipal bond

The 1933 Securities Act provides for a 20-day waiting period between the filing and effective dates of the registration. During this waiting period the registrant is prohibited from engaging in which of these activities?

Accepting offers from potential investors to purchase securities being registered

Within four days after any event of material importance to the stockholders occurs, a company must file a Form 8-K with the SEC to disclose the event. Which of these is an example of the type of event to be disclosed

Acquisition of a large subsidiary

Which one of the following items need not be filed with Form 10-Q?

An audit report from an independent accountant

The SEC's antifraud rules prohibit trading on the basis of inside information of a business corporation's stock by which of these?

Anyone who bases his or her trading activities on inside information

When a cost benefits two or more interim periods, each interim period should be charged for an _ _ of the annual costs Examples:

Appropriate portion Quantity Discounts Property Taxes Advertising Anticipated year-end adjustments, such as bad debt expense, bonuses

Which of these items is not required by the SEC in either the Securities Act of 1933 or the Securities Exchange Act of 1934?

Comfort letter from the company's independent accountant

After the Enron accounting scandal, the SEC encouraged the FASB to quickly develop a new standard on what topic?

Consolidation of special purpose entities

Which of the SEC's organizational units - divisions and principals offices - reviews the registration statements, annual reports, and proxy statements filed with the commission?

Division of Corporation Finance

What is the name of the SEC's online database of company filings?

EGDAR

Which of these events does not require a company to file a Form 8-K?

Election of a new vice-president of finance to replace the retiring incumbent

Companies may use _ _ _ _ to determine COGS

Estimated gross profit rates

Financial Reporting Releases (FRRs) and Staff Accounting Bulletins (SABs) are two pronouncements issues by t the SEC. How do FRRs and SABs differ?

FRRs represent requirements applicable to the form and content of financial statements filed with the SEC, SABs represent accounting interpretations followed by the SEC.

Which of the following is not required for the registration statements filed under the Securities Act of 1933?

Financial forecasts for the next two fiscal years

Which of the following laws requires companies to maintain accurate accounting records and a system of effective internal accounting controls?

Foreign Corrupt practices Act of 1977

Which of the following statements related to the SEC's periodic reporting requirements is false?

Form 10-K, the annual report, is governed only by Regulation S-X, not Regulation S-K.

A significant event affecting a company registered under the Securities and Exchange Act of 1934 should be reported on which of the following?

Form 8-K

Which of the following statements related to registration of new securities is false?

Form S-1, the basic form for new security registration , is an elaborate checklist of rules to be followed and questions to be answered

Disclosure of R&D by segment is not required. Why?

Gives away the future plans of the business and its a cost center

SEC regulations provide for a procedure known as incorporation by reference. Which of the following best illustrates the concept of incorporation by reference?

Inclusion of information on officers' remuneration in Form 10-K by reference to the same information in the shareholders' proxy statement

- essential in providing timely info to stakeholders - under US GAAP, each interim period should be viewed primarily as a integral part of an annual period - In general, companies should employ the same accounting principals for interim statements that are used for annual reporting

Interim Financial Reporting

Which section of Form 10-K is used for management's discussion and analysis of financial condition and results of operations

Item 7

_ _ should not be recognized of the inventory layer giving rise to the liquidation profit is expected to be replaced by year-end

LIFO Liquidation

If a _-_-_-_ decline is expected to be restored by year-end, the decline is not recognized at the interim date

Lower-of-cost-or-market

The role of the SEC regarding financial accounting for public companies is that the SEC does which of the following?

Makes regulations and rules pertaining more to disclosure outside the financial statements than to the setting of accounting principals.

After the credit crisis of 2008, the SEC encouraged the FASB to quickly develop a new standard on what topic?

Mark-to-market accounting for financial instruments

Which of the following are not requirements imposed by the Securities Exchange Act of 1934 and its amendments?

Prospectus requirements

Shareholders may ask or allow others to enter their vote at a shareholders meeting that they are unable to attend. The document furnished to shareholders to provide background information for their vote is a

Proxy statement

Which of the following categories is not registered by the SEC?

Public accounting firms

Once an operating segment has been identified, detailed footnote disclosures must be provided if it meets and 1 of 3 _ _

Quantitative thresholds

Nonfinancial statement disclosures are specified in which of the following?

Regulations S-K

Which of the following acts gives the SEC the ultimate power to suspend trading in a security, delist a security, and prevent brokers and dealers from working in the securities market?

Securities Exchange Act of 1934

Which of the following describes Regulation S-X?

Specifies the general form and content of financial statements filed with the SEC

In cases of false or misleading disclosures in a registration statement that the SEC has allowed to become effective in conjunction with the public sale of securities, investors have the potential for legal recourse (for example, damage suits) against all of the following except

The SEC

Two important topics concerning the SEC are the role it plays in developing accounting principles and the impact the SEC has on the accounting profession and business in general. Which statement concerning the SEC's authority relative to accounting practice is false?

The SEC has little, if any, authority over disclosures in corporate annual reports mailed to shareholders with proxy solicitations. Here, the type of information disclosed and the format to be used are left to the discretion of management

The SEC was established in 1934 to help regulate the United States securities market. Which of the following statements is trust concerning the SEC?

The SEC regulates only securities offered for public sale.

its _ are 10% or more of the combined assets of all operating segments

assets

SEC comment letters and company responses related to its periodic filings are

available on the EDGAR database

Two or more operating segments may be aggregated into a single segment if they have similar _ _

economic characteristics

In providing for interim income taxes, companies must use the _ _ rate (ETR) expected to be applicable for the full fiscal year

effective tax rate

An audit committee of the board of directors consisting of outside directors should be objective in arbitrating disputes between a company's top management and the external auditor because audit committee members

have no direct responsibility for the results of a company's operations

In the registration and sale of new securities issues, the SEC

makes no guarantees regarding the registration statement's material accuracy

Requires disclosures for the same business units that are routinely reported to senior management

management approach

The absolute amount of its reported _ or _ is 10% or more of the greater (in absolute amount) of either: - combined reported profit of all segments that did not report a loss -combined reported loss of all segments that report a loss

profit or loss

Its reported _ (from both external and intersegment sales) is 10% or more of the combined external/intersegment revenue of all operating segments

revenue

Information included in every company's proxy statements includes all the following except

statements of income and comprehensive income for the last three years

SOX requires the SEC to review company filings at least every

three years