Exam (elaborations)
Chapter 23 Full Disclosure in Financial Reporting
- Course
- Intermediate Accounting
- Institution
- University Of Wisconsin - Madison
Chapter 23 Full Disclosure in Financial Reporting
[Show more]
Content preview
CHAPTER 23Full Disclosure in Financial Reporting
Assignment Classification Table (By Topic)
Brief Critical
Topics Questions Exercises Exercises Problems Thinking
1. The disclosure principle; type 2, 3 1, 2, 3
of disclosure.
2. Role of notes that accompany 1, 4, 5 1, 2 1, 2, 3, 4
financial statements.
3. Subsequent events. 6 3 1, 2 1 4, 12
4. Segment reporting; diversified 7, 8, 9, 4, 5, 6, 7 3 2 5, 6, 7
firms. 10, 11
5. Discussion and analysis. 12, 13
6. Interim reporting. 14, 15, 8, 9
16, 17
7. Audit opinions and fraudulent 18, 19 11
reporting.
8. Earnings forecasts. 20, 21 10
*9. Interpretation of ratios. 22, 23, 24 4, 5, 6 5
*10. Impact of transactions on ratios. 8 4, 5, 6 3 13
*11. Liquidity ratios. 8 4, 5, 6 3, 5
*12. Profitability ratios. 28 4, 5, 6 3, 5
*13. Coverage ratios. 4, 5, 6
*14. Activity ratios. 25, 26 8, 9 4, 5, 6 3
*15. Comprehensive ratio problems. 4, 5, 6 3, 5
*16. Percentage analysis. 24, 27 3, 4
*This material is dealt with in an Appendix to the chapter.
Copyright © 2022 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 18/e, Solutions Manual (For Instructor Use Only) 1-3-431
, Assignment Classification Table (By Learning Objective)
Learning Objectives Brief Critical
Questions Exercises Exercises Problems Thinking
1. Review the full disclosure 1, 2, 3 1, 2 1, 2, 3
principle and describe
how it is implemented.
2. Discuss the disclosure 4, 5, 6, 7, 8, 3, 4, 5, 6, 7 1, 2, 3 1, 2 1, 2, 3, 4, 5,
requirements for related party 9, 10, 11, 14, 6, 7, 8, 9, 12
transactions, post-balance- 15, 16, 17
sheet events, major business
segments, and interim
reporting.
3. Identify the major disclosures 12, 13, 18
in the auditor‘s report and
understand management‘s
responsibilities for the
financial statements.
4. Identify reporting issues 19, 20, 21 10, 11
related to fraudulent financial
reporting and financial
forecasts.
*5. Describe the approach to 22, 23
financial statement
analysis.
*6. Identify major analytic ratios 24, 25, 26 8, 9 4, 5, 6 3, 5 13
and describe their
calculation.
*7. Explain the limitations of ratio 28
analysis.
*8. Describe techniques of 24, 27 3
comparative analysis.
*9. Describe techniques of 24, 25, 27 4
percentage analysis.
1-3-432 Copyright © 2022 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 18/e, Solutions Manual (For Instructor Use Only)
,Assignment Characteristics Table
Level of Time
Item Description Difficulty (minutes)
E23.1 Post-balance-sheet events. Moderate 10–15
E23.2 Post-balance-sheet events. Moderate 10–15
E23.3 Segmented reporting. Moderate 5–10
*E23.4 Ratio computation and analysis; liquidity. Simple 20–30
*E23.5 Analysis of given ratios. Moderate 20–30
*E23.6 Ratio analysis. Moderate 30–40
P23.1 Subsequent events. Difficult 40–50
P23.2 Segmented reporting. Moderate 24–30
*P23.3 Ratio computations and additional analysis. Moderate 35–45
*P23.4 Horizontal and vertical analysis. Moderate 40–60
*P23.5 Dividend policy analysis. Difficult 40–50
CT23.1 General disclosures; inventories; property, plant, Simple 10–20
and equipment.
CT23.2 Disclosures required in various situations. Moderate 20–25
CT23.3 Disclosures, conditional and contingent liabilities. Simple 24–30
CT23.4 Post-balance-sheet events. Moderate 20–25
CT23.5 Segment reporting. Moderate 30–35
CT23.6 Segment reporting—theory. Simple 20–25
CT23.7 Segment reporting—theory. Moderate 24–30
CT23.8 Interim reporting. Simple 20–25
CT23.9 Treatment of various interim reporting situations. Moderate 30–35
CT23.10 Financial forecasts. Moderate 24–30
CT23.11 Disclosure of estimates. Moderate 15–20
CT23.12 Reporting of subsequent events. Simple 10–15
*CT23.13 Effect of transactions on financial statements and ratios. Moderate 24–35
Copyright © 2022 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 18/e, Solutions Manual (For Instructor Use Only) 1-3-433
, Answers to Questions
1. As indicated in the text, the major advantages are: (1) additional information pertinent to specific
financial statements can be explained in qualitative terms, or supplementary data of a quantitative
nature can be provided to expand on the information in the financial statements, and (2) restrictions
on basic contractual agreements can be explained. The types of items normally found in footnotes are:
(1) disclosure of accounting methods used, (2) disclosure of contingent assets and liabilities,
(3) examination of creditor claims, (4) claims of equity holders, and (5) executory commitments.
LO: 1, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
2. The full disclosure principle in accounting calls for reporting in financial statements any financial
facts significant enough to influence the judgment of an informed reader. Disclosure has increased
because of the complexity of the business environment, the necessity for timely information, and
the desire for more information on the enterprise for control and monitoring purposes.
LO: 1, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
3. The benefit of disclosing the reconciliation of the effective tax rate and the federal statutory rate is
that an investor can determine the actual taxes paid by the enterprise. Such a determination is
particularly important if the enterprise has substantial fluctuations in its effective tax rate caused
by unusual or infrequent transactions. In some cases, companies only have income in a given period
because of a favorable tax treatment that is not sustainable. Such information should be
extremely useful to a financial statement reader.
LO: 1, Bloom: K, Difficulty: Moderate Time: 3-5, AACSB: Communication, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
4. (a) The increased likelihood that the company will suffer a costly strike requires no disclosure in
the financial statements. The possibility of a strike is an inherent risk of many businesses. It,
along with the risks of war, recession, etc., is in the category of general news.
(b) A note should provide a description of the unusual and infrequent loss in order that the
financial statement user has some understanding of the nature of this item.
(c) Contingent assets which may materially affect a company‘s financial position must be disclosed
when the surrounding circumstances indicate that, in all likelihood, a valid asset will materialize.
In most situations, an asset would not be recognized until the court settlement had occurred.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
5. Transactions between related parties are disclosed to ensure that the users of the financial state-
ments understand the basic nature of some of the transactions. Because it is often difficult to
separate the economic substance from the legal form in related party transactions, disclosure is
used extensively in this area. Purchase of a substantial block of the company‘s common stock by
Holland, coupled with the use of a Holland affiliate to act as food broker, suggests that disclosure is
needed.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
6. ―Subsequent events‖ are of two types:
(1) Those which affect the financial statements directly and should be recognized therein through
appropriate adjustments.
(2) Those which do not affect the financial statements directly and require no adjustment of the
account balances but whose effects may be significant enough to be disclosed with appropriate
figures or estimates shown.
(a) Probably adjust the financial statements directly.
(b) Disclosure.
(c) Disclosure.
(d) Disclosure.
1-3-434 Copyright © 2022 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 18/e, Solutions Manual (For Instructor Use Only)
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Sirih. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $5.49. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
65507 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 15 years now