FSA MODULE 27

Question 1

27.1 Describe the scope of financial statement analysis:

Answer 1

Question 2

27.1 What are the 6 stages of FSA?

Answer 2

Question on this could be they give you some activity someone is doing, and they ask what part of the framework this is from

Question 3

27.1 what are the accounting standards for the US and outside the US?

Answer 3

ASSUME IFRS APPLY UNLESS TOLD OTHERWISE

Question 4

27.1 What are some examples of securities regulations:

Answer 4

IOSCO - International Organisation of Securities Commissions

^^ they set the objectives of securities regulation - goal of investor protection. They work on creating transparent and fair markets. And to reduce systematic risk.

Question 5

27.1 What is a registration statement? (SEC FILINGS)

Answer 5

a company is required to file a registration statement with the SEC every time it wants to issue new equity in the markets.

Question 6

27.1 What is a 10K? (SEC FILINGS)

Answer 6

Is the annual review, including audited financial statements - annual review of the company’s financial performance

Question 7

27.1 What is a proxy statement? (SEC FILINGS)

Answer 7

filed before shareholder votes - the AGM, or the extraordinary general meeting

The proxy statement files with the SEC what the vote at these meetings is going to be

Question 8

27.1 What is a 10-Q? (SEC FILINGS)

Answer 8

quarterly financial statements that are required for US listed companies - outside the US is only generally required semi-annually

These are unaudited, whereas the 10-K is audited

Question 9

27.1 What is an 8-K? (SEC FILINGS)

Answer 9

events that are so significant that they affect the company (M&A, change of law firm the company uses …)

Anything major happening to the company since reported in the 8k)

This is the mechanism in which the company reports price sensitive information to the regulator, the sec

Question 10

27.1 What are forms 3, 4, 5, 144 9SEC FILINGS)?

Answer 10

These are all to do with shares being traded.

major shareholder = you hold greater than 10% of a share class.

If a major shareholder makes a trade this will have to be reported in these filings.

As well as this, any company mangers (so inside trades) are reported here.

Question 11

27.1 What is an 11K? (SEC FILINGS)

Answer 11

Details on employee stock compensation plans

Question 12

27.1 What is reported in the footnotes?

Answer 12

INFORMATION ON ACCOUNTING POLICIES, METHODS AND ESTIMATES

^^ this is most essential - how the numbers on the statements are created.

Question 13

27.1 When is segmental reporting required? And what needs to be reported within this?

Answer 13

If a division makes up over 10% of your company revenue, asset usage, or profits, then segmental disclosure is required.

Any of them, not all of them.

Question 14

27.1 What is a ‘material’ event?

Answer 14

An event that is so significant that it effects the perception of the users of the accounts

Question 15

27.1 What is MD&A?

Answer 15

Management discussion and analysis

It is the company directors reviewing what happened in the year and what is likely to happen going forwards.

Not strictly audited, so can always be accused of slight bias.

Question 16

27.1 What is an Audit report?

Answer 16

Independent review of a company’s financial statement.

The auditors don’t say they are accurate to the nearest dollar - but just to give ‘reasonable assurance’

Unqualified = clean and fair, the others, NOT

Question 17

27.1 What is a standard auditor’s opinion in the Audit report?

Answer 17

Management prepares the accounts - the auditors CHECK them

Question 18

27.1 What are the Key (critical) audit matters in the audit report?

Answer 18

Question 19

27.1 What are the differences between US GAAP and IFRS:

Answer 19

CFO = cash flow fro operations

CFF = cash flow from financing