Financial Reporting & Analysis Flashcards
7 cards from real FA 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
Which of the following represents a key difference between IFRS and US GAAP regarding inventory accounting?
Answer: US GAAP allows LIFO; IFRS does not
US GAAP permits LIFO inventory accounting, while IFRS explicitly prohibits it, requiring FIFO or weighted average cost methods.
Under US GAAP, interest paid and interest received on the cash flow statement are classified as:
Answer: Operating activities
Under US GAAP, interest paid and interest received are classified as operating activities, unlike IFRS which allows more flexibility.
When preparing a cash flow statement using the indirect method, the starting point is:
Answer: Net income from the income statement
The indirect method starts with net income and adjusts for non-cash items and working capital changes to arrive at operating cash flows.
In accounting, goodwill is best defined as:
Answer: The excess of acquisition price paid over the fair value of identifiable net assets
Goodwill arises in acquisitions when the purchase price exceeds the fair value of the target's identifiable net assets, reflecting intangibles like reputation and synergies.
Which trend in a company's financial ratios would most likely indicate deteriorating operational efficiency?
Answer: Increasing inventory days (days inventory outstanding)
Rising inventory days means the company is holding inventory longer before selling it, signaling slower sales or overstocking and reduced efficiency.
Comprehensive income differs from net income in that it also includes:
Answer: Unrealized gains and losses on certain investments and foreign currency translations
Comprehensive income includes net income plus Other Comprehensive Income (OCI) items such as unrealized investment gains/losses and foreign currency translation adjustments.
Under ASC 606, the revenue recognition standard, revenue is recognized when:
Answer: Control of the promised goods or services is transferred to the customer
ASC 606 requires revenue recognition when (or as) control of the goods or services transfers to the customer, not merely when invoiced or payment is received.