CMA Financial Reporting & Documentation Flashcards
6 cards from real CMA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CMA Financial Reporting & Documentation flashcards as text
Under ASC 932, how must publicly traded US companies classify and disclose their oil and gas reserve quantities?
Answer: By reserve category (proved, probable, possible) using SEC-defined price assumptions in annual 10-K filings
ASC 932 (Extractive Activities—Oil and Gas) requires US public companies to disclose proved reserve quantities and standardized measure calculations using SEC-prescribed 12-month average prices in their annual reports.
What is the 'standardized measure of discounted future net cash flows' as required in oil and gas financial reporting?
Answer: A discounted value of future net revenues from proved reserves using a fixed 10% discount rate and SEC-prescribed prices
The standardized measure is a specific SEC-mandated disclosure: PV10 of future net revenues from proved reserves calculated at SEC 12-month average prices, after income taxes, at a 10% discount rate.
In mineral appraisal documentation, what is the purpose of a 'scope of work' statement?
Answer: It defines the extent of research, data collection, and analyses performed and explains why the scope was appropriate for the assignment
USPAP requires appraisers to identify and disclose the scope of work—what was done and why—to allow report users to understand the basis for the appraisal conclusions.
When a CMA prepares an appraisal for litigation support, what is the primary obligation regarding objectivity?
Answer: The appraiser must remain impartial and base conclusions on evidence, not on the client's desired outcome
Even in litigation, USPAP requires appraisers to maintain independence and objectivity; an appraiser who advocates for a client's position rather than following evidence violates professional standards.
What does the 'extraordinary assumption' concept in USPAP mean for a mineral appraisal?
Answer: An assumption that assumes a specific condition that may or may not be true, which if false could alter the value conclusion
An extraordinary assumption is a fact assumed to be true for the appraisal that is not confirmed—if that assumption turns out to be wrong, the value conclusion could change materially.
For estate and gift tax mineral appraisals, what valuation standard must be applied?
Answer: Fair market value (FMV) — the price a hypothetical willing buyer and seller would agree upon in an arm's-length transaction
IRS regulations require fair market value for estate and gift tax purposes, defined as the price agreed upon between a hypothetical willing, knowledgeable buyer and seller, neither under compulsion.