Financial Reporting & Analysis Flashcards
7 cards from real CFC 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
A controller notices that a subsidiary's functional currency differs from the parent's reporting currency. Which method should be used to translate the subsidiary's financials?
Answer: Current rate method, with translation adjustments in OCI
When the functional currency differs from the reporting currency, the current rate method is used and resulting translation adjustments are reported in OCI as part of accumulated other comprehensive income.
Which ratio best measures how efficiently a company uses its assets to generate sales?
Answer: Asset turnover ratio
Asset turnover (Net Sales ÷ Average Total Assets) measures the revenue generated per dollar of assets, indicating operational efficiency.
Under GAAP, research costs must be:
Answer: Expensed as incurred
Under US GAAP (ASC 730), research and development costs must be expensed as incurred because future benefits are too uncertain to capitalize.
What is the effect on the financial statements when a company records an accelerated depreciation method instead of straight-line in the early years of an asset's life?
Answer: Lower net income and lower asset book value in early years
Accelerated depreciation produces higher depreciation expense in early years, reducing net income and accelerating the reduction of the asset's book value compared to straight-line.
A company's earnings per share (EPS) calculation uses the weighted-average number of shares outstanding. If the company repurchases shares mid-year, the effect on diluted EPS will be:
Answer: Denominator decreases, potentially increasing EPS
Share repurchases reduce the weighted-average share count used in the EPS denominator, which tends to increase EPS when net income remains constant.
Which of the following is NOT a required disclosure in the notes to financial statements under US GAAP?
Answer: The CEO's compensation relative to competitors
While executive compensation disclosures are required in SEC filings (proxy statement), peer-relative CEO compensation is not a required note disclosure under US GAAP accounting standards.
Under the allowance method for bad debts, recording an uncollectible account write-off affects which accounts?
Answer: Allowance for doubtful accounts and accounts receivable
Writing off an uncollectible account under the allowance method debits the allowance account and credits accounts receivable, with no impact on net income at write-off.