FAR Study Quiz 1 (Fin Stmt Disclosure)

Which of the following is not required to be disclosed in financial statements under nature of operations?

Major Competitors. One set of disclosures applies to risks and uncertainties relating to the nature of operations. Thus, entities must disclose their (1) major products or services, (2) principal markets, and (3) the locations of those markets. They also should disclose (1) all industries in which they operate; (2) the relative importance of each; and (3) the basis for determining the relative importance, e.g., assets, revenue, or earnings. Major competitors are not required to be disclosed

An enterprise must separately report information about an operating segment when the segment's revenue meets what minimum percentage of the combined revenue of all reported operating segments?

10% Reportable segments are operating segments that must be separately disclosed if (1) reported revenue is at least 10% of the combined revenue of all operating segments, (2) assets are at least 10% of the combined assets of all operating segments, and (3) the absolute amount of reported profit or loss is at least 10% of the greater (in absolute amount) of either (a) the combined profit of all profitable operating segments or (b) the combined loss of all operating segments that reported a loss.

Interim financial reporting should be viewed primarily in which of the following ways?

As reporting for an integral part of an annual period Each interim period primarily is an integral part of an annual period. Ordinarily, the results for an interim period should be based on the same accounting principles the entity uses in preparing annual statements. Certain principles and practices used for annual reporting, however, may require modification at interim dates so that interim reports may relate more closely to the results of operations for the annual period.

For interim financial reporting, which of the following may be accrued or deferred to provide an appropriate cost in each period?

Interest: Yes Rent: Yes Interest and rent may be accrued or deferred at the annual reporting date to achieve a full year's charge to costs and expenses. Similar procedures should be adopted at each interim reporting date.

1. Correy Corp. and its divisions (each is an operating segment) are engaged solely in manufacturing operations. The following data (consistent with prior years' data) pertain to the operations conducted for the year ended December 31, year 1: Operating Segment A: Total Revenue: $10,000,000 Operating Profit: $1,750,000 Identifiable assets at 12/31/Y1: $20,000,000 Operating Segment B: Total Revenue: $8,000,000 Operating Profit: $1,400,000 Identifiable assets at 12/31/Y1: $17,500,000 Operating Segment C: Total Revenue: $6,000,000 Operating Profit: $1,200,000 Identifiable assets at 12/31/Y1: $12,500,000 Operating Segment D: Total Revenue: $3,000,000 Operating Profit: $550,000 Identifiable assets at 12/31/Y1: $7,500,000 Operating Segment E: Total Revenue: $4,250,000 Operating Profit: $675,000 Identifiable assets at 12/31/Y1: $7,000,000 Operating Segment F: Total Revenue: $1,500,000 Operating Profit: $225,000 Identifiable assets at 12/31/Y1: $3,000,000 TOTAL: Total Revenue: $32,750,000 Operating Profit: $5,800,000 Identifiable assets at 12/31/Y1: $67,500,000 In its segment information for year 1, how many segments meet at least one of the 10% tests? a. Three b. Four c. Five d. Six

Correct Answer: C) Five Four operating segments (A, B, C, and E) have revenue equal to or greater than 10% of the $32,750,000 total revenue of all operating segments. These four segments also have profit equal to or greater than 10% of the $5,800,000 total profit. Five segments (A, B, C, D, and E) have assets greater than 10% of the $67,500,000 total assets. Because an operating segment is reportable if it meets one or more of the three tests, Correy Corp. has five reportable segments for Year 2.

The summary of significant accounting policies should disclose the

Criteria for determining which investments are treated as cash equivalents. All significant accounting policies should be disclosed as an integral part of the financial statements. The policy for determining which investments are treated as cash equivalents is such a policy.

A measure of profit or loss and total assets must be disclosed for each reportable segment of an entity. If depreciation expense included in that measure is regularly provided to the segment's chief operating decision maker, it

Must be separately disclosed Required disclosures include a measure of profit or loss and total assets for each reportable segment. Moreover, if the amounts are included in the measure of profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to that person, other required disclosures about each reportable segment include the following: (1) revenues from external customers and other operating segments, (2) interest revenue and expense, (3) depreciation, (4) depletion, (5) amortization, (6) unusual items, (7) equity in the net income of equity-based investees, (8) income tax expense or benefit, and (9) other significant noncash items.

Which of the following information should be included in Melay, Inc.'s summary of significant accounting policies?

Property, plant, and equipment is recorded at cost with depreciation computed principally by the straight-line method. The commonly required disclosures in a summary of significant accounting policies include (1) the basis of consolidation, (2) depreciation methods, (3) amortization of intangible assets, (4) inventory pricing, (5) recognition of profit on long-term construction-type contracts, (6) recognition of revenue from franchising and leasing operations, and (7) the policy for defining cash equivalents. Hence, the summary of significant accounting policies should include information about property, plant, and equipment depreciated by the straight-line method.

YIV, Inc., is a multidivisional corporation that makes both intersegment sales and sales to external customers. If each division qualifies as an operating segment, YIV should report segment financial information for each division when it meets which of the following criteria?

Segment revenue is 10% or more of combined revenue of all the operating segments. An entity separately reports information about an operating segment if it satisfies one of three tests: (1) Its revenue (including sales to external customers and intersegment sales or transfers) is equal to at least 10% of the combined revenue, internal and external, of all the entity's operating segments; (2) its assets are equal to at least 10% of the combined assets of all operating segments; and (3) the absolute amount of its reported profit or loss is equal to at least 10% of the greater, in absolute amount, of the combined reported profit of all operating segments that did not report a loss or the combined reported loss of all operating segments that did report a loss.

The fair value measurement (FVM) of an asset

The FVM is based on the highest and best use (HBU) by market participants. This use maximizes the value of the asset. The HBU is in-use if the value-maximizing use is in combination with other assets in a group. An example is machinery. The HBU is in-exchange if the value-maximizing use is as a standalone asset. An example is a financial asset.