AICPA FAR Exam, Interim Financial Reporting. By Darius Clark financial reporting section c

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This content is for those studying to pass the CPA FAR exam and involves publicly traded companies and the SEC. Public companies report their earnings and material events more than just once per year. NASBA and the AICPA require a Financial accounting and reporting (FAR) candidate to know something about interim financial reporting. The FAR blueprint suggests that a CPA Candidate needs to be aware of the 10-K, 10-Q, 8-K, Form 3, Form S-X, Form S-K, Form S-1 and proxy statements before your NTS expires and before your date with Prometric. These topics will appear in multiple choice or task based simulation. SEC Form S-1 is the initial registration form for a new issuer of securities required by the SEC. Regulation S-X. Contains information regarding the financial statements that must be submitted to the SEC and describes the form and content of financial statements. All financial statements presented in annual reports to the SEC must conform to the accounting and disclosure rules presented in regulation S-X. Form S-K- Contains the instructions for filing the non-financial statement forms required by the SEC. With Form 8-K, companies report material current events to everyone at the same time, such as a product being removed from the market for safety reasons, CEO stepping down, mergers, this is to avoid inside information leaking out first to some parties, then to others. Companies have four business days from the event date to file form 8-k. Form 3 involves a stockholder who owns greater than 10% of the company’s stock must file reports any month where there has been buying or selling. Proxy Statements-Filed by public companies prior to shareholder meetings and all stockholders are given a copy of the proxy which usually involves matters to vote. This material can be tested in FAR but also in Audit or REG. Large Accelerated Filers- Those with a public float above $700 million, must file form 10K within 60 days and 10Q within 40 days after the end of the fiscal period. Accelerated Filers- Public Float between $75 million and $700 Million. Must file form 10K within 75 days and form 10Q within 40 days after the end of the fiscal period. Non-Accelerated Filers- Public Float of less than $75 million. Must file 10K within 90 days and 10Q within 45 days after the end of the fiscal period. As for what gets reported and when, expenses such as bad debts, pension costs, depreciation, bonuses, should be estimated and allocated to each interim period. If total annual depreciation expense is $100,000, show $25,000 in each quarterly income statement. Financial statements for each interim period should be based on accounting principles used for the annual statements, percentage of completion method, for long term contracts, use it for interim reporting also. Expenses should be allocated to periods incurred, prepaid insurance policy on January 1, should be allocated equally to all four interim periods since all four periods are equally impacted. Expenses that impact only one period, should be allocated to that one period. For example, If a company were to prepay in March, April’s rent, the full expense should be taken in the second quarter because the expense is incurred in April. Special rules apply to inventory. Companies are allowed to use the gross profit method to estimate ending inventory as a method of determining cost of goods sold for interim reporting. Companies do not have to formally count inventory at the end of each quarter but the gross profit method is not allowed at year end. Interim reporting, timeliness is emphasized over faithful representation. Mostly we can expect to use the same accounting principles as we use in year end reporting. If you used percentage of completion for annual reporting, percentage of completion for interim reporting. Inventory losses from market declines expected to recover before year end, need not be recognized in the interim financial statements. Inventory losses from market declines NOT expected to recover before year end, are recognized in the interim financial statements, don’t wait til year end to book that decline. Asset Sales, Gains and Losses should be recognized in the interim period statements, do not wait until year end. Other FAR Topics to know for your multiple choice and simulations include Adjusting entries that require reconciliation of cash basis to accrual basis are a “must know”. For bonds, be sure to know when interest expense is higher than cash paid to the bondholders and when cash paid to the bond holders is higher than interest expense. This has to do with whether the bonds are sold at a discount vs sold at a premium. Recording treasury stock has two methods, the cost method and the par value method. Retirement of treasury stock is a popular question on the CPA Exam. Inter-company eliminations for consolidated financial statements is also heavily tested resulting from business combinations. .

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AICPA FAR Exam, Interim Financial Reporting. By Darius Clark

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AICPA FAR Exam, Interim Financial Reporting. By Darius Clark
financial reporting section c
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3 comments

Nathalia Gibbs 27/09/2021 - 2:31 Chiều

Great video! Could you do a video on pensions specifically prior service cost with gains or losses to OCI please?

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Mikehazed 27/09/2021 - 2:31 Chiều

I love these vids. Can you please do more FAR related topics?

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gummi 27/09/2021 - 2:31 Chiều

7:27 60 is within 75, 40 is within 45
totally the type of thing i'll miss points on. darius, when should i be registering for tests if i want the first to be in early january?

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