Reading 29: Financial Statement Analysis: An Introduction-LOS 2011, accounting, management, including, methods

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Session 7: Financial Reporting and Analysis: An Introduction
Reading 29: Financial Statement Analysis: An Introduction

LOS c: Discuss the importance of financial statement notes and supplementary information, including disclosures of accounting methods, estimates, and 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) expected effects of marketplace events.

C) results of operations.

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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.

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

A) is not required by the SEC.

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

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

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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.

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

A) Footnotes may contain information regarding contingent losses.

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

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

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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.

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

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

B) are audited.

C) contain information about contingent losses that may occur.

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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.