Intermediate Power Point (24)

8/7/2019 Intermediate Power Point (24)

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Chapter24-1

Full Disclosure inFull Disclosure inFinancial ReportingFinancial Reporting

ChapterChapter2424

Intermediate Accounting12th Edition

Kieso, Weygandt, and Warfield

Prepared by Coby Harmon, University of California, Santa Barbara


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Chapter24-3

AccountingAccounting

policiespolicies

CommonCommon

notesnotes

FullFull

DisclosureDisclosure

PrinciplePrinciple

Notes toNotes to

FinancialFinancial

StatementsStatements

DisclosureDisclosure

IssuesIssues

Auditors andAuditors and

ManagementsManagements

ReportReport

CurrentCurrent

ReportingReporting

IssuesIssues

Increase inIncrease in

reportingreporting

requirementsrequirements

DifferentialDifferential

disclosuredisclosure

SpecialSpecial

transactionstransactions

or eventsor events

PostPost--balancebalance--

sheet eventssheet events

DiversifiedDiversified

companiescompanies

InterimInterim

reportsreports

AuditorsAuditors

reportreport

ManagementsManagements

reportsreports

Reporting onReporting on

forecasts andforecasts and

projectionsprojections

Internet financialInternet financial

reportingreporting

FraudulentFraudulent

financialfinancial

reportingreporting

Criteria forCriteria for

accounting andaccounting and

reportingreporting

choiceschoices

Full Disclosure inFinancial ReportingFull Disclosure inFinancial Reporting


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Chapter24-5

ExamplesExamples

AccountingAccounting

PoliciesPolicies

ContingenciesContingencies InventoryInventory

MethodsMethods

SharesShares

OutstandingOutstanding

AlternativeAlternative

MeasuresMeasures

FinancialFinancialStatementsStatements

Notes toNotes to

FinancialFinancial

StatementsStatements

SupplementarySupplementaryInformationInformation

Other Means ofOther Means of

FinancialFinancial

ReportingReporting

OtherOtherInformationInformation

Balance sheetBalance sheet

Statement ofStatement of

IncomeIncome

Statement ofStatement ofCash FlowsCash Flows

Statement ofStatement ofChanges inChanges in

StockholdersStockholders

EquityEquity

Examples:Examples:

ChangingChanging

PricesPrices

DisclosuresDisclosures

Oil and GasOil and Gas

ReservesReserves

InformationInformation

Examples:Examples:

ManagementManagement

DiscussionDiscussion

and Analysisand Analysis

Letters toLetters to

StockholdersStockholders

Examples:Examples:

CompetitionCompetition

and Orderand Order

Backlog in SECBacklog in SECFormsForms

Analysts'Analysts'

reportsreports

EconomicEconomic

StatisticsStatistics

ArticlesArticles

LO 1 Review the full disclosure principle and describe implementation problems.

Full Disclosure PrincipleFull Disclosure Principle

BasicFinancial StatementsBasicFinancial Statements

Affected by ExistingFASB StandardsAffected by ExistingFASB Standards

Financial ReportingFinancial ReportingAll Information Useful for Investment, Credit, and Similar DecisionsAll Information Useful for Investment, Credit, and Similar Decisions

Illustration 24-1


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Chapter24-6

Increase in Reporting Requirements

Reasons:

Complexity of Business Environment.

Necessity for Timely Information.

Accounting as a Control and Monitoring Device.




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Chapter24-7

DifferentialDisclosure

Big GAAP versus Little GAAP.

FASB takes the position that there should be

one set of GAAP.




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Chapter24-8

Notes are the means of amplifying or explaining

the items presented in the main body of the

statements.

LO 2 Explain the use of notes in financial statement preparation.

Notes to the Financial StatementsNotes to the Financial Statements

Accounting Policies

Companies should present a statement

identifying the accounting policies adopted(Summary of Significant Accounting Policies).


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Chapter24-9

CommonNotes

Inventory

Property, Plant, andEquipment

CreditorClaims

EquityHoldersClaims

ContingenciesandCommitments

DeferredTaxes, Pensions,andLeases

ChangesinAccountingPrinciples


Notes to theFinancial StatementsNotes to theFinancial Statements


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Chapter24-10

Disclosureof Special Transactionsor Events

Related-party transactions

Illegal acts


Disclosure IssuesDisclosure Issues


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Chapter

24-12

ReportingforDiversified Companies

LO 3Discuss the disclosurerequirementsformajor businesssegments.

DisclosureIssuesDisclosureIssues

Investors and investment analysts income

statement, balance sheet, and cash flow

information on the individualsegments that

compose the total income figure.


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Chapter

24-13

ObjectiveofReporting Segmented Information

LO 3 Discuss the disclosurerequirementsformajorbusiness segments.


To provide information about the different types

ofbusinessactivitiesin which an enterprise

engages and the differenteconomicenvironments

in which it operates.

A company can meet objective by providing financial

statements segmented based on how the companys

operations are managed (Operating Segment).


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Chapter

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Segmented InformationReported

LO 3 Discuss the disclosurerequirementsformajor business segments.


1. General information about operating segments.

2. Segment profit and loss and related information.

3. Segment assets.

4. Reconciliations.

5. Information about products and services andgeographic areas.

6. Major customers.


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Chapter

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InterimReports

LO 4 Describe the accountingproblems associated with interimreporting.


Cover periods of less than one year.

Two viewpoints exist:

1. The discrete approach

2. The integral approach

Companies should use the same accountingprinciples for interim reports that they use forannual reports.


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Chapter

24-17 LO 5Identify the majordisclosures in the auditors report.

Auditors andManagements ReportsAuditors andManagements Reports

Auditors Report

Standard unqualified opinion auditor expressesthe opinion that the financial statements are

presented fairly, in all material respects, inconformity with GAAP.

Other opinions:

QualifiedAdverse

DisclaimIllustration 24-14


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Chapter

24-18 LO 5Identify the majordisclosures in the auditors report.


Managements Report

The SEC mandates inclusion of managements

discussionand analysis (MD&A).

Management highlights favorable or unfavorable

trends related to liquidity, capital resources,

and results of operations.


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Chapter

24-19 LO 6 Understandmanagements responsibilities for financials.


Managements Responsibilities forFinancial

Statements

The Sarbanes-Oxley Act requires the SEC to

develop guidelines for all publicly traded

companies to report on managements

responsibilities for, and assessment of, the

internal control system.


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Chapter

24-20 LO 7Identify issues related to financial forecasts and projections.

Current ReportingIssuesCurrent ReportingIssues

Reporting onFinancialForecasts and Projections

Financial forecastis a set of prospective financial

statements that present, a companys expected

financial position, results of operations, and cashflows.

Financialprojections are prospective financial

statements that present, given one or morehypothetical assumptions, an entitys expected

financial position, results of operations, and cash

flows. SEC Safe Harbor Rule


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Chapter

24-21 LO 8 Describe the professions response to fraudulent financial reporting.

Current ReportingIssuesCurrent ReportingIssues

FraudulentFinancial Reporting

Intentional or reckless conduct, whether

through act or omission, that results in

materially misleading financial statements.

The Sarbanes-Oxley Act has numerous

provisions intended to help prevent fraudulent

financial reporting.


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Chapter

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Intermediate Power Point (24)