What are the six steps involved in the financial statement analysis framework?
- State the objective and context.
- Gather data.
- Process the data.
- Analyze and interpret the data.
- Report the conclusions or recommendations.
- Update the analysis.
What does Financial Reporting refer to?
Financial reporting refers to the way companies present their financial performance to investors, creditors, and other interested parties through financial statements.
What is the role of financial statement analysis?
It uses information from financial statements, along with other relevant information, to make economic decisions like investing in securities, extending credit, or assigning credit ratings.
What are standard-setting bodies?
Standard-setting bodies are professional organizations that establish financial reporting standards.
Which are the two primary standard-setting bodies for financial reporting standards and what do they set out?
- Financial Accounting Standards Board (FASB): Sets U.S. Generally Accepted Accounting Principles (GAAP).
- International Accounting Standards Board (IASB): Establishes International Financial Reporting Standards (IFRS).
What is the role of the International Organization of Securities Commissions (IOSCO)?
OSCO improves cross-border cooperation and promotes uniformity in national regulations and enforcement for securities regulation.
Is the IOSCO a regulatory body?
No, it is not a regulatory body, but its members regulate over 95% of the world’s financial markets.
What are the three IOSCO objectives?
- Protecting investors.
- Ensuring fair, efficient, and transparent markets.
- Reducing systemic risk.
What are the main obligations imposed on companies and auditors by the Sarbanes-Oxley Act of 2002 in relation to reporting requirements?
- Prohibits auditors from providing certain additional services to avoid conflicts of interest.
- Requires management to certify the fairness of financial statements.
- Requires a statement on the effectiveness of internal controls.
What are Proxy Statements and where are they filed?
Proxy statements, filed with the SEC, are issued to shareholders when matters require a vote, providing information on board elections, executive compensation, and stock options.
Under which financial reporting framework do EU countries report?
EU countries report using IFRS.
Who advises the EU Commission on securities regulation issues?
The European Securities Committee advises the EU Commission.
What is ESMA’s role?
ESMA coordinates securities regulation within the EU.
What is the purpose of financial statement notes?
Financial statement notes provide additional details about the financial statements, including accounting policies, assumptions, and estimates.
What is the purpose of Form S-1?
Form S-1 is used by companies to register securities with the SEC for public offerings.
What is the purpose of Form 10-K?
Form 10-K is the annual report providing a comprehensive summary of a company’s financial performance.
What is the purpose of Form 10-Q?
Form 10-Q is the quarterly report summarizing a company’s financial performance.
What is the purpose of Form DEF-14A?
Form DEF-14A is filed for proxy statements involving shareholder votes.
What is the purpose of Form 8-K?
Form 8-K reports significant events like acquisitions, bankruptcy, or changes in leadership.
What is the purpose of Form 144?
Form 144 is filed when an insider plans to sell restricted or control securities.
What is the purpose of Forms 3, 4, and 5?
These forms report insider ownership and changes in ownership of a company’s securities.
Do GAAP and IFRS require companies to report segment data?
Yes, both require companies to report segment data.
How is a segment defined under US GAAP and IFRS?
A segment is defined as a portion of a company that accounts for at least 10% of revenues, assets, or income and has distinguishable risks and returns.
For what minimum percentage of a firm’s external sales should reported segments account?
Segments should account for at least 75% of external sales.
