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Financial Reporting & Analysis Flashcards

7 cards from real AICPA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Financial Reporting & Analysis flashcards as text

  1. Under ASC 350, when must an entity test indefinite-lived intangible assets for impairment?

    Answer: Annually, and when triggering events occur

    Indefinite-lived intangible assets must be tested for impairment at least annually and more frequently when triggering events suggest possible impairment.

  2. A company issues a $1,000 bond at a discount. Over the life of the bond, what happens to interest expense relative to the coupon payment?

    Answer: Interest expense is greater than the coupon payment

    When a bond is issued at a discount, interest expense (effective interest) exceeds the coupon payment because the discount is amortized to interest expense over the bond's life.

  3. Which of the following best describes the concept of 'substance over form' in financial reporting?

    Answer: Transactions should reflect their economic reality regardless of legal structure

    Substance over form requires that transactions be accounted for in accordance with their economic substance and financial reality, not merely their legal form.

  4. Under ASC 820, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. This is known as:

    Answer: Exit price

    ASC 820 defines fair value as an exit price — the price received to sell an asset or paid to transfer a liability in the principal (or most advantageous) market.

  5. When the effective interest rate method is used for amortizing bond premium, how does the amortization amount change over time?

    Answer: It decreases each period

    Under the effective interest method for a premium bond, amortization decreases each period because the carrying value (and thus effective interest) decreases as premium is amortized.

  6. A parent company owns 80% of a subsidiary. Under ASC 810, how should the noncontrolling interest be presented?

    Answer: As a separate component of equity in the consolidated balance sheet

    ASC 810 requires noncontrolling interest to be presented as a separate component of stockholders' equity in the consolidated balance sheet.

  7. Which financial statement analysis technique involves expressing each line item as a percentage of a base amount within the same period?

    Answer: Vertical analysis

    Vertical (common-size) analysis expresses each financial statement line item as a percentage of a base amount (e.g., total assets on the balance sheet, net sales on the income statement) for a single period.