Financial Statements & Reporting Flashcards
6 cards from real CFM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Financial Statements & Reporting flashcards as text
What is the purpose of the statement of comprehensive income?
Answer: To report items that affect equity but are excluded from net income
The statement of comprehensive income includes net income plus other comprehensive income (OCI) items like unrealized gains/losses on certain securities.
Which of the following is an example of an off-balance-sheet financing arrangement?
Answer: Operating lease commitments before ASC 842
Before ASC 842, operating leases were kept off the balance sheet and disclosed only in footnotes, making them a common off-balance-sheet financing tool.
When a company restates its financial statements, what does this typically indicate?
Answer: A material error in previously issued financial statements
A restatement corrects a material error in previously issued financial statements, requiring prior period figures to be revised.
What is segment reporting required to disclose under US GAAP?
Answer: Operating results for each reportable operating segment
ASC 280 requires companies to disclose revenues, profit or loss, and certain assets for each reportable operating segment.
Which ratio indicates how many times a company can cover its interest expense with operating earnings?
Answer: Interest coverage ratio
The interest coverage ratio (EBIT ÷ interest expense) measures how easily a company can pay its interest obligations from operating earnings.
What is the matching principle in accounting?
Answer: Expenses should be recognized in the same period as the revenues they help generate
The matching principle requires that expenses be recognized in the same period as the revenues they helped produce, supporting proper period income measurement.