1) The cohesiveness principle set forth in the FASB’s exposure draft on financial
statement presentation means that firms should present information in their financial
statements so that the relationship between items across financial statements is clear
and that the statements complement or articulate with each other as much as possible.
2) When applying the impairment guidelines to groups of assets, the group should
consist of the highest level for which identifiable cash flows are largely independent of
the cash flow of other groups of assets and liabilities.
3) Book value refers to the amount at which an account (or set of related accounts) is
carried in the company’s records as opposed to the amount reported in the company’s
financial statements.
4) Interest must be imputed whenever the stated rate is not the same as the prime rate of
interest at the time of the transaction.
5) Cash flows arising from the purchase or sale of a company’s own stock are cash
flows from financing activities.
6) Under the FASB’s exposure draft on financial statement presentation, financing costs
arising from on-going operating activities are presented in the “business section” of the
Statement of Comprehensive Income.
7) When a company repurchases its own shares, the transaction may not result in
treasury stock being reported on the balance sheet.
8) The annual amortization of both discount on bonds payable (bond discount) and
premium on bonds payable (bond premium) increases as the bond matures.
9) Opposition to the FASB review of APB No. 25 on stock options arose because stock
options do not involve a cash outflow, and to treat them as an expense violates
materiality.
10) Solvency refers to the long-term ability to generate sufficient cash to satisfy plant
capacity needs, fuel growth, and to repay debt when due.
11) IFRS permits two methods for handling actuarial gains and losses, one of which
requires actuarial gains and losses to be recognized on the balance sheet and in OCI but
which does not require that the actuarial gains and losses be subsequently amortized.
12) The more a company relies on long-term borrowing to finance its business
activities, the lower its debt ratio and long-term solvency risk.