1) Presently, no regulatory agency, such as the Securities and Exchange Commission or
the Financial Accounting Standards Board, accepts responsibility for determining either
the content of financial ratios or the format of presentation in annual reports.
2) An adverse opinion states that, except for the effects of the matter(s) to which the
qualification relates, the financial statements present fairly, in all material respects, the
financial position, results of operations, and cash flows of the entity in conformity with
generally accepted accounting principles.
3) The successful efforts method places only exploration and production costs of
successful wells on the balance sheet under property, plant, and equipment.
4) The SEC has the authority to determine generally accepted accounting principles and
to regulate the accounting profession.
5) Extraordinary items are always presented gross of applicable income taxes.
6) When a portion of operating lease payments is included in fixed charges, it is an
effort to recognize the true total interest that the firm is paying.
7) Under inflationary conditions, the least conservative inventory method is lifo.
8) An approximation of the operating cycle can be determined from the receivable
liquidity figures and the inventory liquidity figures.
9) The sequence of accounting procedures completed during each accounting period is
called the accounting cycle.
10) Warranty obligations are estimated in order to recognize the obligation at the
balance sheet date and to charge the expense to the period of the sale.
11) For personal financial statements, the statement of financial condition is similar to a
balance sheet.
12) Some firms question the costs/benefits of implementing Sarbanes-Oxley.