Financial Reporting & Analysis Flashcards

Under US GAAP, which method is prohibited for inventory valuation that is allowed under IFRS?

Answer: LIFO

IFRS prohibits the Last-In, First-Out (LIFO) method, while US GAAP permits it.

A company reports total assets of $500,000 and total liabilities of $200,000. What is the debt-to-equity ratio?

Answer: 0.67

Equity = $500,000 - $200,000 = $300,000; Debt-to-Equity = $200,000 / $300,000 = 0.67.

Which financial statement reconciles net income to cash provided by operating activities?

Answer: Statement of Cash Flows

The Statement of Cash Flows (indirect method) starts with net income and adjusts for non-cash items and working capital changes.

Goodwill impairment testing under ASC 350 requires companies to perform the test at minimum:

Answer: Annually

ASC 350 requires goodwill to be tested for impairment at least annually, or more frequently if triggering events occur.

The quick ratio differs from the current ratio because it excludes:

Answer: Inventory and prepaid expenses

The quick ratio excludes inventory and prepaid expenses as they are less liquid than other current assets.

A company using the percentage-of-completion method recognizes revenue:

Answer: Proportionally as the project progresses

The percentage-of-completion method recognizes revenue and profit in proportion to the work completed each period.

Which of the following would be classified as a financing activity on the Statement of Cash Flows?

Answer: Payment of dividends

Payment of dividends to shareholders is a financing activity because it involves transactions with equity holders.