Reading 31: Financial Reporting Standards - LOS h ～ Q1-3 class, accounting, standards, recently

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1.Management disclosure of the likely impact of implementing recently issued accounting standards is least likely to:

A)   state that the impact of the standard is impossible to determine.

B)   conclude that the standard does not apply.

C)   state that they are still evaluating the effects of the new standards.

D)   conclude that the standard will not affect the financial statements materially.

2.An analyst is least likely to use disclosures of accounting policies and estimates to evaluate:

A)   what policies are discussed.

B)   which policies required management to make estimates.

C)   what policies are likely to be modified in future periods.

D)   whether the disclosures have changed since the prior period.

3.An analyst can find a company’s significant accounting methods and estimates in:

A)   only the footnotes.

B)   only the auditor’s opinion.

C)   both the footnotes to the financial statements and Management’s Discussion and Analysis.

D)   both the footnotes and in the auditor’s opinion.

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答案和详解如下：

1.Management disclosure of the likely impact of implementing recently issued accounting standards is least likely to:

A)   state that the impact of the standard is impossible to determine.

B)   conclude that the standard does not apply.

C)   state that they are still evaluating the effects of the new standards.

D)   conclude that the standard will not affect the financial statements materially.

The correct answer was A)

A disclosure that is required for public companies is the likely impact of implementing recently issued accounting standards. Management can discuss the impact of adopting the standard, conclude that the standard does not apply or will not affect the financial statements materially, or state that they are still evaluating the effects of the new standards. Analysts should be aware of the uncertainty that this last statement implies.

2.An analyst is least likely to use disclosures of accounting policies and estimates to evaluate:

A)   what policies are discussed.

B)   which policies required management to make estimates.

C)   what policies are likely to be modified in future periods.

D)   whether the disclosures have changed since the prior period.

The correct answer was C)    

Companies that prepare financial statements under IFRS or U.S. GAAP must disclose their accounting policies and estimates in the footnotes and Management’s Discussion and Analysis. An analyst should use these disclosures to evaluate what policies are discussed, whether they cover all the relevant data in the financial statements, which policies required management to make estimates, and whether the disclosures have changed since the prior period.

3.An analyst can find a company’s significant accounting methods and estimates in:

A)   only the footnotes.

B)   only the auditor’s opinion.

C)   both the footnotes to the financial statements and Management’s Discussion and Analysis.

D)   both the footnotes and in the auditor’s opinion.

The correct answer was C)    

Companies that prepare financial statements under IFRS or U.S. GAAP must disclose their accounting policies and estimates in the footnotes and address those policies and estimates where significant judgment was required in Management’s Discussion and Analysis. The auditor’s opinion discusses whether policies have been applied appropriately, but does not include the estimates and policies themselves.