Reading 29: Financial Statement Analysis: An Introduction LOS following, management, accounting, face, 2010

honeycfa

LOS c: Discuss the importance of financial statement notes and supplementary information, including disclosures of accounting methods, estimates, assumptions, and management’s discussion and analysis.

The Management Discussion and Analysis (MD&A) portion of the financial disclosure is required to discuss all of the following EXCEPT:

A) capital resources and liquidity.

B) results of operations.

C) expected effects of marketplace events.

---

The MD&A portion of the financial disclosure is required to discuss results of operations, capital resources and liquidity and a general business overview based on known trends. A discussion of expected effects of marketplace events may voluntarily be included by a firm, but is not required in the MD&A portion.

 

honeycfa

The Management Discussion and Analysis (MD&A) portion of the financial statements:

A) is not required by the SEC.

B) includes such items as discontinued operations, extraordinary items, and other unusual or infrequent events.

C) includes audited disclosures that help explain the information summarized in the financial statements.

---

The MD&A provides an assessment of the financial performance and condition of the company from the perspective of the company and is required by the SEC. It includes many areas including such items as discontinued operations, extraordinary items, and other unusual or infrequent events. The MD&A is typically not audited.

honeycfa

Which of the following statements regarding footnotes to the financial statements is least accurate?

A) Footnotes may contain information regarding contingent losses.

B) Footnotes provide information about assumptions and estimates used by management.

C) Some supplementary schedules are audited whereas footnotes are not audited.

---

Some supplementary schedules are not audited whereas footnotes are audited. The financial statements and footnotes in the annual report and the SEC 10-k filings are all audited.

honeycfa

Which of the following statements concerning the notes to the audited financial statements of a company is least accurate? Financial statement notes:

A) are audited.

B) include management's assessment of the company's operating performance and financial results.

C) contain information about contingent losses that may occur.

---

Management's perspective on the company's results is provided in the Management's Discussion and Analysis supplement to the financial statements. Financial statement notes (footnotes) provide information about matters such as the company's accounting methods and assumptions, contingencies, and acquisitions and disposals. Footnotes to the financial statements are audited.