CFC Financial Reporting & Analysis 3

Question 1

Which of the following best describes the purpose of segment reporting under ASC 280?

Accepted Answer

To disclose financial information about distinct operating units of an entity

Answer

ASC 280 requires public companies to disclose disaggregated financial information for each reportable operating segment based on how management internally reviews performance.

Question 2

In a vertical analysis of the income statement, each line item is expressed as a percentage of:

Accepted Answer

Net revenues (sales)

Answer

Vertical analysis of the income statement uses net revenues as the base (100%) to express each item as a proportional percentage.

Question 3

What is the primary difference between comprehensive income and net income?

Accepted Answer

Comprehensive income includes other comprehensive income items bypassing net income

Answer

Other comprehensive income (OCI) items such as unrealized gains on AFS securities and foreign currency translation adjustments are included in comprehensive income but excluded from net income.

Question 4

A company's days sales outstanding (DSO) increases significantly year-over-year. What is the most likely implication?

Accepted Answer

Customers are taking longer to pay, potentially signaling collection risk

Answer

Rising DSO indicates accounts receivable are outstanding for more days, which may signal deteriorating credit quality or aggressive revenue recognition.

Question 5

Under the equity method of accounting, how does an investor record dividends received from an investee?

Accepted Answer

As a reduction of the investment account

Answer

Under the equity method, dividends received reduce the carrying value of the investment rather than being recognized as income, since income was already recorded based on the investor's share of the investee's earnings.

(CFC) Certified Financial Controller Practice Test

(CFC) Certified Financial Controller Practice Test

CFC Financial Reporting & Analysis 3