F1: Financial Reporting

What does the income statement provide info about? (mnemonic)

R -	Revenues
E -	Expenses
G -	Gains
L -	Losses

What are the 6 criteria for being classified as “held for sale”?

1. Management commits to plan to sell

2. Component is presently available for sale

3. Actively looking for a buyer

4. Sale is probable and expected within a year

5. Active marketing is at a reasonable price relative to fair value

6. Significant changes to the plan to sell are not expected

What do the items in Other Comprehensive Income include? (mnemonic)

P -	Pension Adjustments
U -	Unrealized Gains and Losses on AFS debt securities and hedges
F -	Foreign Currency Translation Items
I -	Instrument Specific Credit Risk

What are the steps for reporting dilutive EPS from Options, Warrants, and Their Equivalents (Treasury Stock Method)?

Step 1: Determine if Dilutive: Avg Market Price > Exercise Price

Step 2: Compute the "Additional Shares Outstanding"

What are the steps for reporting dilutive EPS from Convertible Bonds (If-Converted Method)?

Step 1: Numerator = Net Income + Bond Interest, net of tax

Step 2: Denominator = Common Stock + Convertible Bonds

What are the steps for reporting dilutive EPS from Convertible Preferred Stock (If-Converted Method)?

Step 1: Numerator = Do not reduce net income by preferred stock dividend

Step 2: Denominator = Common Stock + Convertible Preferred Stock

What are the steps for the distribution of dividends to participating preferred stockholders?

Step 1: Find the cash dividends amount

Step 2: Subtract the preferred dividends in arrears for Year 1 (# shares * par * %)

Step 3: Subtract the same preferred dividends in arrears for Year 2

Step 4: Total is equal to the dividends remaining for distribution

Step 5: Subtract the common stock amount (shares * par * %) --> This will be the amount remaining for proration

Step 6: Allocate the amount remaining for proration between preferred stock and common stock

What are the basic JE rules?

Debits	Credits
D E A	L O R
Dividends	Liabilities
Exp/Losses	OE
Assets	Rev/Gains

What are the JEs for a foreign currency transaction?

Transaction Date:
	Purchases	Amt * ER
		A/P	xxx
B/S Date:
	A/P	Amt * (Prev ER - Current ER)
		Foreign Currency Transaction Gain			xxx
Settlement Date:
	A/P			xxx
	Foreign Currency Transaction Loss			Amt * (Prev ER - Current ER)
		Cash				Amt * Current ER

What is the JE for Appropriated RE?

Retained Earnings (Unappropriated)				xxx
	Retained Earnings Appropriated for [purpose]				xxx

What are the JEs for the Cost Method of Treasury Stock?

Original Issue:
	Cash	# shares * SP
		C/S	# shares * par
		APIC - C/S	xxx
Buy Back Above Issue Price:
	T/S	# shares * SP
		Cash	xxx
Reissue ABOVE Cost:
	Cash	# shares * SP
		T/S	# shares * repurchase price
		APIC - T/S	xxx
Reissue BELOW Cost:
	Cash	# shares * SP
	APIC - T/S	xxx
	RE	xxx
		T/S	# shares * repurchase price

What are the JEs for the Par Value Method of Treasury Stock?

Original Issue:
	Cash	# shares * SP
		C/S	# shares * par
		APIC - C/S	xxx
Buy Back ABOVE Issue Price:
	T/S	# shares * par
	APIC - C/S	# shares * (Prev SP - par)
	RE*	xxx
		Cash	# shares * SP
	*Made if there's no balance in the APIC - T/S account
Buy Back BELOW Issue Price:
	T/S	# shares * par
	APIC - C/S	# shares * (Prev SP - par)
		Cash	# shares * SP
		APIC - T/S	xxx
Reissue Shares:
	Cash	# shares * SP
		T/S	# shares * par
		APIC - C/S	xxx

What are the JEs for the Retirement of Treasury Stock under the Cost Method?

C/S	# shares * par
APIC - C/S	# shares * (Prev SP - par)
RE	xxx
	T/S	# shares * SP

What are the JEs for the Retirement of Treasury Stock under the Par Value Method?

C/S	# shares * par
	T/S	xxx

What are the JEs for Donated Stock?

Record Donation:
	Donated T/S	@FMV
		APIC	xxx
Donation Sold:
	Cash	# shares * SP
	APIC	if SP < original FMV
		APIC	if SP > original FMV
		Donated T/S	@ book value or original FMV

What are the JEs for the Direct Retirement of Stock?

Original Issue:
	Cash	# shares * SP
		C/S	# shares * par
		APIC - C/S	xxx
Direct Retirement ABOVE Issue Price:
	C/S	# shares * par
	APIC - C/S	# shares * (Prev SP - par)
	RE*	xxx
		Cash	# shares * SP
	*Made if there's no balance in APIC - Retired Stock account
Direct Retirement BELOW Issue Price:
	C/S	# shares * par
	APIC - C/S	# shares * (Prev SP - par)
		APIC - Retired Stock		xxx
		Cash		# shares * SP

What is the JE for stock issued above Par Value?

Cash	# shares * SP
	Common (or Preferred) Capital Stock			# shares * par
	APIC			xxx

What is the JE for stock issued at Par Value?

Cash	# shares * SP
	Common (or Preferred) Capital Stock			xxx

What is the JE for stock issued below Par Value?

Cash	# shares * SP
APIC	xxx
	Common (or Preferred Capital Stock)			# shares * par

What is the JE for Subscriptions?

Sale of Subscriptions:
	Subscriptions Receivable		# shares * SP
		Common Stock Subscribed		# shares * par
		APIC		xxx
Collection of Subscriptions:
	Cash	xxx
		Subscriptions Receivable		xxx
Issuance of Stock Previously Subscribed:
	Common Stock Subscribed		xxx
		Common Stock (issued)		xxx

What is the JE for the exercising of stock rights?

Cash	# shares * Ex P
	C/S	# shares * par
	APIC	xxx

What are the JEs for Dividends?

Declaration Date (Generally):
	Retained Earnings		xxx
		Dividend Payable		xxx
Property Dividends:
	RE PPE	xxx xxx
		Div Pay Gain	xxx xxx
Scrip Dividends (Declaration):
	Retained Earnings Interest Expense		xxx xxx
		Notes Payable Interest Pay		xxx xxx
Liquidating Dividends:
	RE APIC	Reduce any RE Excess
		Div Pay	xxx
Small Stock Dividend:
	RE	# shares * FV
		C/S	# shares * par
		APIC	xxx
Large Stock Dividend (Declaration):
	RE	# shares * %
		C/S Distributable		xxx
Large Stock Dividend (Distribution):
	C/S Distributable		# shares * %
			Capital Stock	xxx

What is the formula for Impairment Loss?

Impairment Loss = NRV - BV

What is the formula for NRV?

NRV = Fair Value (or Selling Price) - Cost to Sell

What is BV also equal to?

Carrying Value

What is the formula for Comprehensive Income?

Net Income
+/- Other Comprehensive Income
= Comprehensive Income

What is the set-up of a multi-step income statement?

Net Sales
- Cost of Sales
= Gross Margin
- Selling, General & Administrative Exp
- Depreciation Expense
= Income (Loss) From Operations
+ Other Revenues & Gains
- Other Expenses & Losses
= Income Before Income Tax
- Income Tax Expense
= Income from Continuing Operations
- Discontinued Operations (net of tax)
= Net Income

What is the formula for Net Sales?

Net Sales = Gross Sales - Returns & Discounts

What is the set-up of the Statement of Other Comprehensive Income?

Beginning Other Comprehensive Income & PUFI
+/- PUFI gains and losses in the CY
+/- Reclassification adjustment
= Ending Accumulated OCI (part of SE)

What is the formula for Basic EPS?

Basic EPS = Income Available to Common Shareholders ÷ Weighted Average Number of Common Shares Outstanding

What is the formula for Income Available to Common Shareholders?

Income Available to Common Shareholders = Net Income - Preferred Dividends

How do we calculate preferred dividends depending on if they’re cumulative or noncumulative?

Preferred Dividends:
If CUMULATIVE = # Shares * Par Value * Rate
If NONCUMULATIVE = Declared

What is the formula for the Weighted Average Number of Common Shares Outstanding?

Shares Outstanding at the Beginning of the Period
+ Shares Sold During the Period
- Shares Reacquired During the Period
+ Stock Dividends and Stock Splits
- Reverse Stock Splits
= Weighted Average Number of Common Shares Outstanding

What is the formula for Diluted EPS?

Diluted EPS  = (Income Available to the Common Stock Shareholder + Interest on Dilutive Securities) ÷ Weighted Average Number of Common Shares (Assuming All Dilutive Securities are Converted to C/S)

What is the formula for Additional Shares Outstanding under the Treasury Stock Method?

Treasury Stock Method for Additional Shares Outstanding = Number of Shares - [(Number of Shares * Exercise Price) ÷ Average Market Price]

What is the formula for the Number of Shares Outstanding?

Shares Outstanding = Shares Issued - Shares Repurchased

What is the formula for Common Shareholders’ Equity?

Common Shareholders' Equity = Total Stockholders' Equity - Claims of Preferred Shareholders

What is the formula for Book Value per Common Share?

Book Value per Common Share = Common Shareholders' Equity ÷ Common Shares Outstanding

What is the formula for Common Shareholders’ Equity?

Total Shareholders' Equity
- Preferred Stock Outstanding (at greater of call price or par value)
- Cumulative preferred dividends in arrears
= Common Shareholders' Equity

What is the formula for Retained Earnings?

Net Income/Loss
- Dividends (cash, property, and stock) declared
+/- Prior period adjustments
+/- Accounting changes reported retrospectively
= Retained Earnings