Interim financial reporting should be viewed as reporting for an integral part of an annual period because interim financial statements generally are not audited, each statement presented should be marked unaudited. (page 38)
When the loss is probable and estimable, the expected loss must be recorded in full. This loss becomes such at the end of the fourth quarter. Therefore, the inventory must be valued on the year-end at the lower of cost or market, recognizing the loss at that time. (page 38)
Segment Reporting
A reportable operating segment is one having 10% of all revenues, including revenue from unaffiliated sales and from intersegment sales. SFAS 14, SFAS 131 (page 41) Unaffiliated customers sales and intracompany sales must be disclosed separately.(page 62).
Sales to other segments would be used in determining a segments operating income. Rule: Equity in net income of another company, general corporate expenses, interest income tax expense, and gains or losses on discontinued operations are all not included in segment profit unless they are included in the determination of segment profit reported to the Chief Operating Decision Maker. (page 60).
In order to conform to GAAP, the financial statements for public business enterprises must report segment information about a companys major customers if that customer provides 10% or more of the combined revenue, internal and external, of all operating segments. (page 39).
For each reportable segment of an enterprise, both profit or loss and total assets should be disclosed. In disclosure questions, if you are not sure, disclose the most rather than the least. (page 39).
For segment reporting, if an identified segments assets more than 10% of the combined assets of all operating segments, the segment should be reported. The same rule does not apply for the segments liabilities. The candidate does have to remember the 10% and also the 10% of what.
Only publicly-traded enterprises are required to report on business segments.
A segment is considered reportable if its reported revenue, including sales to unaffiliated customers and intersegment sales, is 10% or more of the combined revenue (unaffiliated and intersegment) of all operating segments. (page 41)
Development-Stage Enterprises
Development stage enterprises must use all the same principles as established enterprises including those of revenue recognition and deferral of expenses. The primary difference is that stage enterprises must provide additional disclosures not required of established operating enterprises. SFAS #7, para 10. (page 43)
All organizational costs (start-up costs) should be expensed when incurred (per SOP 98-5) (page 43)