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Chapter 24: 9IFRS_b (page 1468)

Snider Corporation, a publicly-traded company, is preparing the interim financial data which it will issue to its shareholders at the end of the first quarter of the 2017鈥�2018 fiscal year. Snider鈥檚 financial accounting department has compiled the following summarized revenue and expense data for the first quarter of the year.

Sales revenue \(60,000,000

Cost of goods sold 36,000,000

Variable selling expenses 1,000,000

Fixed selling expenses 3,000,000

Included in the fixed selling expenses was the single lump-sum payment of \)2,000,000 for television advertisements for the entire year.

Instructions

b) What financial information, as a minimum, must Snider Corporation disclose to its shareholders in its quarterly reports?

Short Answer

Expert verified

Information like issuance, purchase, policy, and other things should be mentioned in reports that disclose to shareholders.

Step by step solution

01

Meaning of interim reporting

An interim report is a statement made for a short period (less than one financial year). Its main components are the cash flow statement, income statement, and balance sheet, which are prepared monthly, quarterly, semi-annually, or on an ad hoc basis.

02

Explaining the financial information that Snyder Corporation must disclose to its shareholders in its quarterly reports

  1. Snider Corporation must disclose a condensed statement of financial statement.
  2. Informative comments about the regularity or cyclicality of interim operations.
  3. The nature and sum of items affecting assets, liabilities, equity, net income, or cash flows are unusual because of their nature, size, or frequency.

4. The type and magnitude of the accounting policy changes, as well as estimates of the amounts previously reported.

5. Issuance, repurchase, and repayment of debt and equity securities.

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Most popular questions from this chapter

(Post-Balance-Sheet Events) For each of the following subsequent (post-balance-sheet) events, indicate whether a company should (a) adjust the financial statements, (b) disclose in notes to the financial statements, or (c) neither adjust nor disclose.

  1. Settlement of federal tax case at a cost considerably in excess of the amount expected at year-end.
  2. Introduction of a new product line.
  3. Loss of assembly plant due to fire.
  4. Sale of a significant portion of the company鈥檚 assets.
  5. Retirement of the company president.
  6. Prolonged employee strike.
  7. Loss of a significant customer.
  8. Issuance of a significant number of shares of common stock.
  9. Material loss on a year-end receivable because of a customer鈥檚 bankruptcy.
  10. Hiring of a new president.
  11. Settlement of prior year鈥檚 litigation against the company (no loss was accrued).
  12. Merger with another company of comparable size.

The following statement is an excerpt from the FASB pronouncement related to interim reporting. Interim financial information is essential to provide investors and others with timely information as to the progress of the enterprise. The usefulness of such information rests on the relationship that it has to the annual results of operations. Accordingly, the Board has concluded that each interim period should be viewed primarily as an integral part of an annual period. In general, the results for each interim period should be based on the accounting principles and practices used by an enterprise in the preparation of its latest annual financial statements unless a change in an accounting practice or policy has been adopted in the current year. The Board has concluded, however, that certain accounting principles and practices followed for annual reporting purposes may require modification at interim reporting dates so that the reported results for the interim period may better relate to the results of operations for the annual period.

Instructions

The following six independent cases present how accounting facts might be reported on an individual company鈥檚 interim financial reports. For each of these cases, state whether the method proposed to be used for interim reporting would be acceptable under generally accepted accounting principles applicable to interim financial data. Support each answer with a brief explanation.

c) Republic Company wrote inventory down to reflect lower-of-cost-or-market in the first quarter. At year-end, the market exceeds the original acquisition cost of this inventory. Consequently, management plans to write the inventory back up to its original cost as a year-end adjustment.

Carlton Company is involved in four separate industries. The following information is available for each of the four industries.

Operating Segment

Total Revenue

Operating Profit (Loss)

Identifiable Assets

W

\( 60,000

15,000

\)167,000

X

10,000

3,000

83,000

Y

23,000

(2,000)

21,000

Z

9,000

1,000

19,000

\(102,000

\)17,000

$290,000

Instructions

Determine which of the operating segments are reportable based on the:

b) Operating profit (loss) test.

Answer each of the questions in the following unrelated situations.

d) A company has current assets of \(600,000 and current liabilities of \)240,000. The board of directors declares a cash dividend of $180,000. What is the current ratio after the declaration but before payment? What is the current ratio after the payment of the dividend?

What is the relationship of the asset turnover to the return on assets?
See all solutions

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