Financial Statements

• Disclosures pertains to risks and uncertainties that could significantly affect the amounts reported in the F/S in the near term.

• Nature of operations.

• Use of estimates in preparing the financial statements.

• Significant concentrations in certain aspects of the entity operation.

An entity is considered to be a going concern if it is reasonably expected to remain in existence and be able to settle all its obligation for the foreseeable future, as they become due.

Management must evaluate whether there is substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time not to exceed one year beyond the insurance date of the financial statement.

Substantial doubt exists when conditions and events considered in the aggregate, indicate it is probable (future event as "likely to occur") that the entity will not be able to meet its obligations as they become due within one year from the occurrence. Financial statement insurance date. Management's evaluation should be based on relevant conditions and events that are known and reasonably knowable at the financial statement issuance date.

• The entity's current financial condition
• The entity's obligation due or anticipated in the next year
• The funds necessary to maintain operations in the next year
• Both internal and external matters indicating financial difficulties for the entity 

• After completing the analysis and determining there are probable conditions that raise substantial doubt about the entity's ability to continue as going concern management must examine whether there are factors to mitigate those conditions.

• Whether it is probable that the plans will be effectively implemented.

• Whether it is probable that the plans will be successful in mitigating the adverse conditions or events that raise substantial doubt about the company's ability to continue as a going concern. 

Regardless of whether management's plans to mitigate those conditions are considered effective, management is required to disclose that fact and the reason (s) giving rise to such doubt as well as management's response to it.

• No substantial doubt exists, in which case no disclosures are required and financial statements are prepared using the going concern basis of accounting.
• Substantial doubt is alleviated, in which case the financial statements are prepared using a going concern basis, with certain disclosures required.
• Substantial doubt is not alleviated, in which case the financial statements are prepared using the going concern basis, with certain disclosures.

1. The primary conditions or events that initially raised substantial doubt about the entity's ability to continue as a going concern.

2. Management's evaluation of the significance of those conditions or events in relation to the entity's ability to meet its obligations.

3. Management's plans that alleviated the substantial doubt.

• A statement that there is substantial doubt about the entity's ability to continue as a going concern within one year of the financial statement issuance date.

• The primary conditions or events that raise substantial doubt about the entity's ability to continue as a going concern.

• Management's evaluation of the significance of those conditions or events in relation to the entity's ability to meet its obligations.

• Management's plans are intended to mitigate adverse conditions or events.

An event or transaction that occurs after the balance sheet date but before the financial statements are issued or are available to be issued.

1. Recognized subsequent events -- Provide additional information about conditions that existed at the balance sheet date.

2. Nonrecognized subsequent events --Provide information about conditions that occurred after the balance sheet date and did not exist on the balance sheet date. 

Fair value is the price to sell an asset or transfer a liability in a transaction between market participants at the measurement date.

1. Market approach - Uses price and other relevant information from market transactions involving identical or comparable assets or liabilities to measure fair value.

2. Income approach - Comvertss future amounts, including cash flows or earnings, to a single discount amount to measure the fair value of assets or liabilities. 

3. Cost approach - Uses current replacement cost to measure the fair value of assets.

1. Level 1 Inputs - Quoted prices in active markets for identical assets liabilities. Highest priority.

2. Level 2 Inputs -  Inputs other than quoted market prices that are directly or indirectly observable for an asset or liability.

3. Level 3 Inputs - unobservable inputs for market asset or liability that reflect the entities' assumptions and are based on the best available information.

• Operating segment 

• Products and services

• Geographic areas

• Major customers

• 10 percent "size" test

• 75 perent "reporting sufficiency" test

It is a component of an entity:

• That engages in business-type activities which earn revenues and incur expenses.

• Whose operating results are regularly reviewed by the entity's CODM.

• For which discrete financial info is available.

All transactions between the segments of an entity are not eliminated in a consolidation between the parent company and its subsidiaries

Only if the segments have the same in each of the following areas:

• The nature of the products and services;
• The nature of the production processes;
• The type or class of customer for the products and services;
• The methods used to distribute the products or provide the services; and 
• If applicable, the nature of the regulatory environment 

• Revenue: Reported revenue and intersegment sales are 10 percent or more of the combined revenue of all operating segments.

• Reported profit or loss: The absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount, of:

  • The combined reported profit of all operating segments that did report a loss.

  • The combined reported loss of all operating segments that did report a loss.

• Assets: Assets are 10 percent or more of the combined assets of all operating segments.

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