Financial Reporting and Analysis Quiz

SME’s, ME’s, and small entities are all classified based on specific criteria set by reporting frameworks.

Financial statements should be presented in a clear and understandable manner, allowing users to make informed decisions.

The equity method is used when an investor has significant influence over an investee.
Investments are recognized at cost and adjusted for the share of the investee’s profit or loss.

A financial instrument is a contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

Property, plant and equipment (PP&E) are tangible assets held for use in the production or supply of goods or services.
PP&E is recognized at cost and depreciated over its useful life.

Intangible assets are identifiable, non-monetary assets without physical substance.
They are recognized at cost and amortized over their useful life.

Leases are a type of agreement that grants the right to use an asset for a specified period.
Lease accounting rules vary depending on the type of lease.

Deferred tax accounting aims to match the recognition of tax expense with the recognition of the related income.

Employee benefits are any form of compensation provided to employees in addition to salaries and wages.

Inventories are assets held for sale in the ordinary course of the business, in the process of production for such sale, or in the form of materials or supplies to be consumed in the production process, or in the rendering of services.
Inventories are measured at the lower of cost and net realizable value.
Cost is typically determined using the first-in, first-out (FIFO), last-in, first-out (LIFO), or weighted-average methods.
Net Realizable Value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

An equity method investment is an investment where the investor has significant influence over the investee.
Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.
An equity method investment is typically recorded at cost and then adjusted each period to reflect the investor's share of the investee's net income or loss.
Unrealized gains and losses on equity method investments are recognized in profit or loss.

Financial instruments are contracts that give rise to a financial asset of one entity and a financial liability or equity instrument for another entity.
Financial assets are assets that represent a contractual right to receive cash or another financial asset from another entity.
Financial liabilities represent a contractual obligation to deliver cash or another financial asset to another entity.
Equity instruments are any contracts that give rise to a residual interest in the assets of an entity after deducting all liabilities.

Property, plant and equipment (PPE) are tangible assets that are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes.
PPE is typically recognized at cost, which includes all costs incurred to bring the asset to the condition and location necessary for its intended use.
PPE is depreciated over its useful life to reflect the decline in its value.

An intangible asset represents a future economic benefit that is not embodied in a physical asset.
Intangible assets include patents, trademarks, copyrights, and goodwill.
Intangible assets are typically recognized at cost, which includes all costs incurred to bring the asset to the condition and location necessary for its intended use.
Amortization is the process of expensing the cost of an intangible asset over its useful life.

A lease is an agreement whereby the lessor grants the lessee the right to use an asset for a period of time in return for payment.
Operating leases are leases that do not transfer substantially all the risks and rewards of ownership of the underlying asset to the lessee.
Finance leases are leases that transfer substantially all the risks and rewards of ownership of the underlying asset to the lessee.
Under IFRS 16, all leases are now treated as finance leases, with the exception of short-term leases of less than 12 months.

Income taxes are taxes levied by governments on the income of individuals and businesses.
Deferred tax liabilities arise when income is taxed in a later period than it is recognized in the financial statements.
Deferred tax assets arise when income is taxed in an earlier period than it is recognized in the financial statements.

Employee benefits are all forms of compensation provided to employees in exchange for their services.
Retirement benefits are benefits that provide income to employees after they retire.
Post-employment benefits are benefits that are provided to employees after they have left the company.

There are a number of other reporting frameworks that can be used by companies.
International Financial Reporting Standards (IFRS) is the most widely used framework for international companies.
United States Generally Accepted Accounting Principles (US GAAP) is the framework used by companies in the United States.
Other frameworks include the Philippine Financial Reporting Standards (PFRS), and the Australian Accounting Standards Board (AASB) Standards.