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F I F T E E N T H
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Intermediat
ACCOUNTING
Intermediat
e
e
Accounting
Accounting
Prepared by
Coby Harmon
Prepared by
Prepared by
University of California,
Barbara
CobySanta
Harmon
Harmon
Westmont
College SantaCoby
University
of California,
Barbara
University of California, Santa Barbara
24-1
Westmont College
kieso
weygandt
warfield
team for success
PREVIEW OF CHAPTER 24
Intermediate Accounting
15th Edition
Kieso Weygandt Warfield
24-2
24
Full Disclosure in
Financial Reporting
LEARNING
LEARNINGOBJECTIVES
OBJECTIVES
After studying this chapter, you should be able to:
1.
5.
2.
6.
3.
7.
8.
4.
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24-4
LO 1
Illustration 24-1
Types of Financial
Information
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LO 1
24-6
Complexity of business
environment.
LO 1
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LO 1
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LO 1
24
Full Disclosure in
Financial Reporting
LEARNING
LEARNINGOBJECTIVES
OBJECTIVES
After studying this chapter, you should be able to:
1.
5.
2.
6.
3.
7.
8.
4.
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Accounting Policies
Companies should present a statement identifying the
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first note or
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LO 2
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MAJOR
DISCLOSURES
Inventory
Creditor Claims
Equityholders Claims
Fair Values
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LO 2
24
Full Disclosure in
Financial Reporting
LEARNING
LEARNINGOBJECTIVES
OBJECTIVES
After studying this chapter, you should be able to:
1.
5.
2.
6.
3.
7.
8.
4.
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Disclosure Issues
Disclosure of Special Transactions or Events
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Related-party transactions
Disclosure Issues
If a business entity entered into certain related party transactions, it
would be required to disclose all the following information except the
a. nature of the relationship between the parties to the
transactions.
b. nature of any future transactions planned between the parties
and the terms involved.
c.
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LO 3
Disclosure Issues
Post-Balance Sheet-Events
(Subsequent Events)
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Illustration 24-3
Time Periods for
Subsequent Events
Disclosure Issues
Illustration: For each of the following subsequent events, indicate
whether a company should (a) adjust the financial statements, (b)
disclose in notes to the financial statements, or (c) neither adjust nor
disclose.
______
a 1.
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______
c 2.
______
b 3.
______
b 4.
______
c 5.
______
b 6.
LO 3
Disclosure Issues
Illustration: For each of the following subsequent events, indicate
whether a company should (a) adjust the financial statements, (b)
disclose in notes to the financial statements, or (c) neither adjust nor
disclose.
______
c 7.
c 8.
______
______
a 9.
______
c 10. Hiring of a new president.
LO 3
Disclosure Issues
Reporting for Diversified Companies
Investors and investment analysts want income statement,
balance sheet, and cash flow information on the individual
segments that compose the total income figure.
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Illustration 24-5
Segmented Income
Statement
LO 3
Disclosure Issues
Objective of Reporting Segmented Information
To provide information about the different types of business
activities in which an enterprise engages and the different
economic environments in which it operates.
Meeting this objective will help users:
a) Better understand the enterprises performance.
b) Better assess its prospects for future net cash flows.
c) Make more informed judgments about the enterprise as a
whole.
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LO 3
Disclosure Issues
Basic Principles
GAAP requires that general-purpose financial statements
include selected information on a single basis of segmentation.
A company can meet the segmented reporting objective by
providing financial statements segmented based on how the
companys operations are managed (management
approach).
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LO 3
Disclosure Issues
Identifying Operating Segments
An operating segment is a component of an enterprise:
a. That engages in business activities from which it earns
revenues and incurs expenses.
b. Whose operating results are regularly reviewed by the
companys chief operating decision-maker.
c. For which discrete financial information is available.
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LO 3
Disclosure Issues
Identifying Operating Segments
Quantitative Materiality Test: Must satisfy one to determine
whether the segment is significant enough to warrant actual
disclosure.
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1.
2.
3.
LO 3
Disclosure Issues
Identifying Operating Segments
Quantitative Materiality Test: In applying these tests, the
company must consider two additional factors.
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1.
2.
LO 3
Disclosure Issues
Materiality Test Illustration
Illustration 24-6
Data for Different Possible
Reporting Segments
Advance slide in
presentation
mode to reveal
answers.
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LO 3
Disclosure Issues
Materiality Test Illustration
Illustration 24-6
Data for Different Possible
Reporting Segments
Advance slide in
presentation
mode to reveal
answers.
LO 3
Disclosure Issues
Segmented Information Reported
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 and geographic
areas.
6. Major customers.
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LO 3
Disclosure Issues
Revenue of a segment includes
a. only sales to unaffiliated customers.
b. sales to unaffiliated customers and intersegment sales.
c. sales to unaffiliated customers and interest revenue.
d. sales to unaffiliated customers and other revenue and
gains.
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LO 3
Disclosure Issues
The profession requires disaggregated information in the
following ways:
a. products or services.
b. geographic areas.
c. major customers.
d. all of these.
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LO 3
24
Full Disclosure in
Financial Reporting
LEARNING
LEARNINGOBJECTIVES
OBJECTIVES
After studying this chapter, you should be able to:
1.
5.
2.
6.
3.
7.
8.
4.
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Disclosure Issues
Interim Reports
Cover periods of less than one year.
Two viewpoints exist:
1. Discrete approach
2. Integral approach
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LO 4
Disclosure Issues
Unique Problems of Interim Reporting
1. Advertising and Similar Costs
2. Expenses Subject To Year-end Adjustment
3. Income Taxes
4. Extraordinary Items
5. Earnings per Share
6. Seasonality
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LO 4
Disclosure Issues
In considering interim financial reporting, how does the
profession conclude that such reporting should be viewed?
a. As a "special" type of reporting that need not follow
generally accepted accounting principles.
b. As useful only if activity is evenly spread throughout the
year so that estimates are unnecessary.
c. As reporting for a basic accounting period.
d. As reporting for an integral part of an annual period.
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LO 4
24
Full Disclosure in
Financial Reporting
LEARNING
LEARNINGOBJECTIVES
OBJECTIVES
After studying this chapter, you should be able to:
1.
5.
2.
6.
3.
7.
8.
4.
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Qualified
Adverse
Disclaim
Illustration 24-13
Auditors Report
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LO 5
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Going Concern
Lack of Consistency
Emphasis of a Matter
LO 5
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LO 5
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LO 5
24
Full Disclosure in
Financial Reporting
LEARNING
LEARNINGOBJECTIVES
OBJECTIVES
After studying this chapter, you should be able to:
1.
5.
2.
6.
3.
7.
8.
4.
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LO 6
Illustration 24-15
Managements
Discussion and Analysis
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LO 6
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LO 6
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LO 6
Illustration 24-16
Report on Managements
Responsibilities
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LO 6
24
Full Disclosure in
Financial Reporting
LEARNING
LEARNINGOBJECTIVES
OBJECTIVES
After studying this chapter, you should be able to:
1.
5.
2.
6.
3.
7.
8.
4.
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LO 7
LO 7
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LO 7
24
Full Disclosure in
Financial Reporting
LEARNING
LEARNINGOBJECTIVES
OBJECTIVES
After studying this chapter, you should be able to:
1.
5.
2.
6.
3.
7.
8.
4.
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LO 8
Illustration 24-17
Types of Economic Crime
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LO 8
Illustration 24-18
Trends in Reported Fraud
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LO 8
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LO 8
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LO 8
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LO 8
APPENDIX
24A
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APPENDIX
24A
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LO 9
APPENDIX
24A
Ratio Analysis
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APPENDIX
24A
Ratio Analysis
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Illustration 24A-1
LO 10
APPENDIX
24A
Ratio Analysis
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Illustration 24A-1
LO 10
APPENDIX
24A
Ratio Analysis
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Illustration 24A-1
APPENDIX
24A
Ratio Analysis
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Illustration 24A-1
LO 10
APPENDIX
24A
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Use of estimates.
APPENDIX
24A
Comparative Analysis
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Illustration 24A-2
APPENDIX
24A
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Illustration 24A-3
APPENDIX
24A
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Illustration 24A-4
LO 13
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Like GAAP, IFRS requires that for transactions with related parties,
companies disclose the amounts involved in a transaction; the amount,
terms, and nature of the outstanding balances; and any doubtful
amounts related to those outstanding balances for each major category
of related parties.
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Neither GAAP nor IFRS require interim reports. Rather, the SEC and
securities exchanges outside the United States establish the rules. In the
United States, interim reports generally are provided on a quarterly
basis; outside the United States, six-month interim reports are common.
LO 14
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ON THE HORIZON
Hans Hoogervorst, chairperson of the IASB, recently noted: High quality
financial information is the lifeblood of market-based economies. It is the same
with financial reporting. If investors cannot trust the numbers, then financial
markets stop working. For market-based economies, that is really bad news. It
is an essential public good for market-based economies. . . . And in the past 10
years, most of the worlds economiesdeveloped and emerginghave
embraced IFRSs. While the United States has yet to adopt IFRS, there is no
question that IFRS and GAAP are converging quickly. We have provided
expanded discussion in the International Perspectives and IFRS Insights. After
reading these discussions, you should realize that IFRS and GAAP are very
similar in many areas, with differences in those areas revolving around some
minor technical points. In other situations, the differences are major; for
example, IFRS does not permit LIFO inventory accounting.
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LO 14
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LO 14
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LO 14
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LO 14
Copyright
Copyright 2013 John Wiley & Sons, Inc. All rights reserved.
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