ACC 318 7-2.Taya.Volk

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Disclosure 1. Explain the importance of the full disclosure principle. The full disclosure principle is important because states that all financial information significant enough to influence the decision of the reader must be reported. This way the reader can not be misled. 2. Provide a rationale for disclosing financial information to stakeholders in a variety of financial reporting situations. Businesses are required by law to release any financial information that can influence the readers decisions such as a shareholder. "Financial statements are important to investors because they can provide enormous information about a company's revenue, expenses, profitability, debt load, and the ability to meet its short-term and long-term financial obligations." (Maverick, 2022) Specific Financials of a Given Company Use the financials of either The Coca-Cola Company or PepsiCo, Inc. The company you choose should be used to address the following: 1. Explain the disclosure requirements for related-party transactions. Include the following details in your response: A. Related-Party Disclosure, FASB Accounting Standards Codification ASC 850. B. Related-party transactions are required to disclose any financial statements other than compensation arrangements, expense allowances, or other similar items that occur during the operation of the business. Disclosures are not permitted to assert
that the terms of related-party transactions were essentially equivalent to arm's- length dealings unless those claims can be substantiated. 2. Explain the disclosure requirements for contingent liabilities. Include the following details in your response: A. Contingencies, FASB Accounting Standards Codification ASC 450. B. "...ASC 450 requires the entity to disclose the nature of the unasserted claim or loss contingency, and either an estimate of the possible loss, a range of the possible loss, or a statement that such an estimate cannot be made, be disclosed." (Dynamics, Ready to make a change? ) 3. Explain the disclosure requirements for subsequent events. Include the following details in your response: A. Subsequent Events, FASB Accounting Standards Codification ASC 855. B. Any adjustments to the financial statements that are necessary because of subsequent events should be disclosed. Also, a description of any financial effects because of subsequent events that are material and occurred between the balance sheet date and the date of issuance of the financial statements. The date through which the company has evaluated subsequent events should also be disclosed. 4. Explain the disclosure requirements for major business segments. Include the following details in your response: A. Segment Reporting, FASB Accounting Standards Codification ASC 280.
B. The type of information that is required or important to disclose for ASC 280 is information about profit or loss, assets, investments, expenditures, measurement of segment profit or loss and assets, reconciliations, and entity-wide information. 5. Explain the disclosure requirements for interim reporting. Include the following details in your response: A. Interim reporting, FASB Accounting Standards Codification ASC 270. B. Minimum disclosure requirements for the interim financial reports: 1. sales or gross revenue 2. income taxes 3. extraordinary items 4. net income 5. comprehensive income 6. seasonal revenue and expenses 7. significant changes in financial position 8. Contingencies 9. changes in accounting principles10. changes in accounting estimates 11. segment information. Accounting Change and Error Correction Use the financials of either The Coca-Cola Company or Pepsi Co, Inc. The company you choose should be to address the following: 1. Determine the impact on a company for an accounting change. Consider the following question to guide your response: A. "Normally under generally accepted accounting principles (GAAP), when there is a shift in accounting principles the asset balances and income amounts for the prior years are adjusted to what they would have been if they had been calculated under the new standard. However, adjusting prior-year inventory balances to be based on a LIFO calculation is generally impractical." (Cromwell, 2019) All
significant changes in accounting policies are required to be disclosed on the business's financial statements. 2. Determine the impact that an error correction can have on a company. Consider the following questions to guide your response: A. Financial statements errors can have a significant effect on a business. Financial statements are used by stockholders, creditors, and stakeholders to help make decisions about the business's financial well-being and performance. Errors can lead to mistakes in the financial statements, which can deceive the potential or current investors and affect their decisions about investing in a business. Errors can also result in non-compliance with accounting standards and regulations, which can lead to financial or legal consequences for the business. B. If there was an Excel calculation error in a spreadsheet that resulted in $3 million less expense and it was discovered in the same reporting period, it could be corrected by making an adjusting entry in the general ledger to increase the depreciation expense by $3 million and reduce the net income by the same amount. The corrected financial statements would then need to be reissued and made available to stakeholders.
References Cromwell, J. (2019, May 8). Rules for changing from FIFO to lifo . Small Business - Chron.com. Retrieved February 19, 2023, from https://smallbusiness.chron.com/rules-changing-fifo-lifo- 36595.html Dynamics, G. A. A. P. (n.d.). Ready to make a change? GAAP Dynamics. Retrieved February 19, 2023, from https://www.gaapdynamics.com/insights/blog/2020/01/07/example-accounting- for-unasserted-claims/#:~:text=With%20respect%20to%20disclosures%2C%20ASC,cannot %20be%20made%2C%20be%20disclosed . Maverick, J. B. (2022, May 26). Why do shareholders need financial statements? Investopedia. Retrieved February 19, 2023, from https://www.investopedia.com/ask/answers/032615/why- do-shareholders-need-financial-statements.asp#:~:text=Financial%20statements%20are %20important%20to,are%20three%20major%20financial%20statements .
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