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Int. Acct. I
Chapter 23: Full Disclosure in Financial Reporting
| Term | Definition |
|---|---|
| full disclosure principle | The full disclosure principle calls for financial reporting of any financial facts significant enough to influence the judgment of an informed reader |
| differential disclosure | allowing different types/sizes of companies to report differently (e.g., eliminating the reporting of fair values of financial instruments for nonpublic companies |
| accounting principles | the specific accounting principles and methods a company currently uses and considers most appropriate to present fairly its financial statements. |
| related party transactions | arise when a company engages in transactions in which one of the parties has the ability to significantly influence the policies of the other |
| post-balance sheet events (subsequent events) | these are material events occurring after the balance sheet date (e.g., 12/31), but before financial statements are issued (e.g., 3/1). They must be disclosed in the notes only |
| recognized subsequent events | events that provide additional evidence about conditions that existed at the balance sheet date, including the estimates inherent in the process of preparing financial statements |
| non-recognized subsequent events | events that provide evidence about conditions that did not exist at the balance sheet date but arise subsequent to that date |
| management approach | providing financial statements segmented based on how the company’s operations are managed |
| operating segment | a component of a company |
| common costs | those incurred for the benefit of more than one segment and whose interrelated nature prevents a completely objective division of costs among segments |
| interim reports | cover periods of less than one year |
| discrete approach | companies should treat each interim period as a separate accounting period |
| integral approach | companies should treat the interim report as an integral part of the annual report and deferrals and accruals should take into consideration what will happen for the entire year |
| seasonality | occurs when most of a company’s sales occur in one short period of the year while certain costs are fairly evenly spread throughout the year |
| auditor's report | attest to (verifies) the fairness of financial reporting and the adequacy of internal controls |
| auditor | attest to (verifies) the fairness of financial reporting and the adequacy of internal controls |
| unqualified opinion | auditor's satisfaction that the fairness of financial reporting and the adequacy of internal controls are presented in accordance with GAAP |
| critical audit matter | any audit matter that was communicated or required to be communicated to the audit committee of the company’s board of directors |
| qualified opinion | contains an exception to the standard opinion |
| adverse opinion | required in any report in which the exceptions to fair presentation are so material that in the independent auditor’s judgment, a qualified opinion is not justified |
| disclaimer of opinion | appropriate when the auditor has gathered so little information on the financial statements that no opinion can be expressed |
| Management’s Discussion and Analysis (MD&A) | this (typically long) section includes management’s opinions and analysis of operating results, liquidity, and capital resources. Management may highlight favorable or unfavorable trends; it is biased, but informative |
| Management’s Responsibilities for Financial Statements | this letter includes management’s responsibility for financial reporting and internal controls and resulted from the Sarbanes-Oxley Act |
| fraudulent financial reporting | defined as “intentional or reckless conduct, whether act or omission, that results in materially misleading financial statements. |
| accounting errors | unintentional mistakes |
| fraud | defined as “intentional or reckless conduct, whether act or omission, that results in materially misleading financial statements. |
| illegal acts | encompass such items as illegal political contributions, bribes, kickbacks, and other violations of laws and regulations |
| XBRL | a computer language adapted from the code of the Internet. It “tags” accounting data to correspond to financial reporting items that are reported in the balance sheet, income statement, and the cash flow statement. |
| financial forecast | a set of prospective financial statements that present, to the best of the responsible party’s knowledge and belief, a company’s expected financial position, results of operations, and cash flows |
| financial projection | are prospective financial statements that present, to the best of the responsible party’s knowledge and belief, given one or more hypothetical assumptions, an entity’s expected financial position, results of operations, and cash flows |
| safe harbor rule | to help protect companies from shareholder lawsuits for failure to meet expectations if the expectations were prepared on a reasonable basis and disclosed in good faith |
Created by:
ryanriggs18
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