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The OIC (Organismo Italiano di Contabilità) sets accounting principles and standards for small national businesses in Italy, ensuring compliance and consistency in financial reporting.

The main components of an annual report for a listed company include financial highlights, governance and ownership structure, discussion and analysis of economic events, financial statements, balance sheets, income statements, cash flow statements, footnotes, auditors' reports, and management responsibility statements.

The notes to the consolidated financial statements provide important context for the numbers in the financial statements and are based on institutional frameworks, helping users understand the underlying information.

<p>IASB (International Accounting Standards Board) sets international accounting standards (IFRS) to ensure comparability across companies, promoting transparency and consistency in financial reporting.</p> Signup and view all the answers

<p>Public companies are required to use a public accounting firm for their financial statement audits to ensure independent verification and compliance with financial reporting regulations.</p> Signup and view all the answers

<p>Liquidity in a company indicates its ability to meet long-term obligations with pure cash, not assets, and is linked to profitability through the accrual principle. The accrual system recognizes revenues when goods or services are delivered, regardless of when cash flows occur, and the financial statements follow specific frameworks for presentation.</p> Signup and view all the answers

<p>The balance sheet is typically organized into two sections, except in the UK where it's organized into one. It is used by investors to assess a firm's financial obligations, investments, debt, and assets. Assets and liabilities are classified based on liquidity and activity-related criteria, with the former categorizing assets and liabilities into short-term (current) and long-term (non-current).</p> Signup and view all the answers

<p>The income statement is used by investors to examine sales, expenses, the economic result compared to competitors, and the company's operating income. Its typical presentation includes multiple steps, with the first step calculating the gross profit as the difference between revenues and cost of goods sold. The second step calculates the contribution margin by subtracting advertising and promotional costs from the gross profit.</p> Signup and view all the answers

<p>The balance sheet's presentation based on liquidity checks the synchronization between the duration of assets and liabilities, ensuring that assets can cover obligations. It is used by investors to assess a firm's financial obligations, investments, debt, and assets.</p> Signup and view all the answers

<p>The income statement's steps are intermediate results, describing how profit is generated, and include the calculation of gross profit, contribution margin, and operating profit. They are important for companies as they provide insights into the company's earnings from core operations and the impact of costs on profitability.</p> Signup and view all the answers

<p>Cash flows are classified into operations, investing, and financing activities.</p> Signup and view all the answers

<p>Cash flow from operations should ideally be positive and is related to the core business.</p> Signup and view all the answers

<p>Income tax expense is subtracted from profit before tax to obtain the final profit for the period.</p> Signup and view all the answers

<p>Financing and funding decisions impact profit before tax.</p> Signup and view all the answers

<p>Asset evaluation principles distinguish between monetary and non-monetary assets, with different valuation rules for each.</p> Signup and view all the answers

<p>The purpose of an annual report is to report on the company's activities throughout the past year, providing information about the company's financial performance and activities to shareholders and other interested parties.</p> Signup and view all the answers

<p>The length of an annual report may vary based on the complexity of the company. More complex companies tend to have longer annual reports, which can extend up to 600 pages or more.</p> Signup and view all the answers

<p>Listed companies are required to publish an annual report, as per regulatory requirements. This is to provide information to shareholders and potential investors. Family-owned businesses, on the other hand, may not be required to publish an annual report.</p> Signup and view all the answers

<p>Annual reports are significant for shareholders as they provide crucial information about the company's financial performance and activities. This information helps shareholders make informed decisions about their investments.</p> Signup and view all the answers

<p>Most jurisdictions require companies to prepare and disclose annual reports. Additionally, many jurisdictions mandate the filing of annual reports at the company's registry as part of their regulatory framework.</p> Signup and view all the answers

<p>The different methods commonly used are the straight-line method, units-of-production method, and declining balance method (accelerated depreciation).</p> Signup and view all the answers

<p>Non-monetary and monetary assets have different evaluation criteria: cost-based and fair value-based.</p> Signup and view all the answers

<p>Accounts receivables are valued at their net realizable value, while inventories are evaluated at the lower of cost (FIFO, LIFO, weighted average, specific identification) or market price.</p> Signup and view all the answers

<p>Fixed assets are evaluated, respectively, at their depreciated or amortized cost.</p> Signup and view all the answers

<p>When an investor has control over an investee company (over 50% ownership), it must prepare consolidation.</p> Signup and view all the answers

<p>The allowance method estimates the amount of uncollectible accounts to be matched to related revenues, based on historical experience. It is determined by analyzing past data and trends to estimate the percentage of sales that will likely become uncollectible.</p> Signup and view all the answers

<p>Inventory is measured at the lower of cost and net realizable value. The cost of inventories is assigned by specific identification or first-in, first-out/weighted average cost formula for interchangeable items.</p> Signup and view all the answers

<p>When inventories are sold, their carrying amount is recognized as an expense in the period when the related revenue is recognized. Write-down of inventories to net realizable value and all losses are recognized as an expense in the period the write-down or loss occurs.</p> Signup and view all the answers

<p>Depreciation is the process of allocating the cost of a fixed asset over its useful life, and is recorded as an expense and a decrease in the asset's value.</p> Signup and view all the answers

<p>Impairing an asset is required if its net book value is higher than the recoverable value, resulting in an extraordinary loss of value expense. This will decrease the asset's value on the balance sheet and lead to a recognition of the impairment loss on the income statement.</p> Signup and view all the answers