Spectrum for Assessing Financial Reporting Quality
Quality Spectrum of Financial Reports The spectrum of financial reporting quality serves as a basis for evaluating the quality of different reports. This spectrum ranges from high-quality financial reports with sustainable earnings to reports that are unreliable and lack useful…
Financial Reporting Quality Vs. Quality of Reported Results
Generally, analysts would always have access to financial reports that follow strong financial reporting standards, such as those issued by the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB), and that are free from any manipulation….
Presentation of Long-Term Liabilities and Share-based Compensation
Presentation and Disclosure of Leases Both IFRS and US GAAP state that the purpose of lease disclosures is to provide financial statement users with information to evaluate the amount, timing, and uncertainty of cash flows related to leases. On the…
Financial Reporting of Defined Contributions, Benefits, and Stock-Based Compensation
Employee Compensation Employee compensation packages are structured to achieve various objectives, including meeting employees’ liquidity needs, retaining them, and motivating their performance. Common components of employee compensation include salary, bonuses, health, and life insurance premiums, defined contribution and benefit pension…
Financial Reporting of Leases
Non-current liabilities include diverse sources of financing and different types of creditors. They include bonds, loans, leases, and post-employment liabilities such as defined contribution, defined benefit, and stock-based compensation plans. Lease Contract A lease is a contract between a lessor,…
Financial Statement Disclosures Regarding PPE and Intangible Assets
Users of financial statements can use financial statement disclosures to deepen their understanding of a company’s investments in tangible and intangible assets. Financial statement disclosures divulge such details as how those investments have changed during a reporting period, how the…
Impairment and Derecognition of PPE and Intangible Assets
While depreciation and amortization spread the cost of a long-lived asset over its useful life, impairment charges address unexpected value decreases. An asset is impaired when its carrying amount is higher than its recoverable amount. International Financial Reporting Standards (IFRS)…
Intangible Assets
Intangible assets, from its name, are assets that lack physical substance. Intangible assets encompass items with exclusive rights like patents, copyrights, trademarks, and franchises. According to IFRS, identifiable intangible assets must meet three definitional criteria: Additionally, identifiable intangible assets must…
Presentations and Disclosures Relating to Inventories
Presentation and Disclosures Relating to Inventories IFRS Disclosure Requirements: Under IFRS, companies must include the following information in their financial statements regarding inventories: Practice inventory accounting concepts with our CFA Free Trial US GAAP Disclosure Requirements Inventory-related disclosures under US…
Inflation and Deflation of Inventory Costs
Rising inventory costs (inflation) or declining inventory costs (deflation) can significantly impact a company’s financial statements, depending on the inventory valuation method used. Differences in the selected valuation method can affect companies’ comparability when doing financial ratio analysis. FIFO Method…
