#30 Risks & Uncertainties

Question 1

What sources of risk and uncertainty must be disclosed?

Answer 1

1. Nature of operations
2. Use of estimates
3. Certain significant estimates
4. Significant concentrations
5. Ability to exist as a going concern

Question 2

Regarding the nature of operations, financial statements/notes are required to include a description of what 3 things?

Answer 2

1. Major products or services
2. Principal markets
3. Geographical locations

Question 3

Regarding the use of estimates, a firm must communicate which 3 things to users?

Answer 3

1. Use of estimates is inescapable in preparing financial statements
2. Estimates result in approximate amounts, not certainty
3. Estimates involve assumptions about future events

Question 4

Disclosure about an estimate is required when the following two criteria are met:

Answer 4

1. It is at least reasonably possible that an estimate will change in the near term
2. The effect of the change would be material

Question 5

Disclosures about significant estimates must include what?

Answer 5

1. The nature of the uncertainty that may cause an estimate to change
2. The estimated effect of the change

Question 6

Disclosures are required for what four significant concentrations?

Answer 6

1. Concentrations in the volume of business with a particular customer, supplier, lender, grantor or contributor
2. Concentrations in revenue from specific products, services, or fund raising sources
3. Concentrations in specific sources of services, materials, labor, licenses or rights
4. Concentrations in the market or geographic area of operations

Question 7

Regarding a companies ability to exist as a going concern, when are disclosures required?

Answer 7

Only when there is substantial doubt about the entity’s going concern.