CIRO Financial Reporting & Disclosure 5

Question 1

Which SEC filing form is used by foreign private issuers to submit their annual report?

Accepted Answer

20-F

Answer

Foreign private issuers that do not qualify to use Form 40-F (reserved for certain Canadian issuers) file their annual reports with the SEC on Form 20-F.

Question 2

An analyst asks an IR officer for a breakdown of revenue by individual customer. The IR officer should be aware that SEC rules generally require disclosure of a customer only when:

Accepted Answer

That customer accounts for 10% or more of total revenue

Answer

ASC 280-10-50-42 requires disclosure of revenues from a single external customer that account for 10% or more of the entity's total revenues.

Question 3

What is the primary distinction between a 'restatement' and a 'revision' in the context of financial reporting corrections?

Accepted Answer

Restatements correct material errors in previously issued financial statements; revisions correct immaterial errors

Answer

A restatement is required when a material error is identified in previously issued financial statements, while a revision (also called a 'little r' restatement) corrects immaterial errors in prior periods.

Question 4

Under IFRS (as adopted by many foreign companies listed in the U.S.), how does the treatment of development costs differ from U.S. GAAP?

Accepted Answer

IFRS allows capitalization of development costs when certain criteria are met, while U.S. GAAP generally requires expensing

Answer

Under IAS 38, development costs meeting specific criteria (technical feasibility, intention to complete, ability to use/sell, etc.) may be capitalized, whereas U.S. GAAP under ASC 730 generally requires immediate expensing of R&D costs.

Question 5

A company's stock price drops 40% following an earnings miss. An investor sues, claiming securities fraud. Under the Private Securities Litigation Reform Act (PSLRA), what must the plaintiff demonstrate to survive a motion to dismiss?

Accepted Answer

That the complaint states with particularity facts giving rise to a strong inference of scienter

Answer

The PSLRA requires plaintiffs to plead with particularity facts that give rise to a strong inference that the defendant acted with scienter (intentional or reckless misconduct), a high pleading standard designed to deter frivolous suits.

(CIRO) Certified Investor Relations Officer Practice Test

(CIRO) Certified Investor Relations Officer Practice Test

CIRO Financial Reporting & Disclosure 5