Financial Statements Overview
Financial Statements
Balance Sheet
Current & non-current assets
Current & long-term liabilities
Stockholders' equity
Income Statement
Revenue
Cost of goods sold
Operating expenses
Other income/expenses
Income tax expense
Statement of Cash Flows
Operating activities
Investing activities
Financing activities
Statement of Stockholders' Equity
Common/preferred stock
APIC
Retained earnings
Treasury stock
AOCI
GAAP Hierarchy
U.S. GAAP Sources
Authoritative
FASB ASC (sole source)
SEC rules/SABs (public entities)
ASUs (updates to codification)
Nonauthoritative
FASB Concepts Statements
AICPA Issues Papers
Industry practice / textbooks
Consolidation and Investment Hierarchy
Level of Influence
Control (>50%)
Full consolidation
Eliminate intercompany transactions
Report NCI in equity
Significant Influence (20-50%)
Equity method
Single-line balance sheet / income
Adjust for share of income/dividends
No Significant Influence (<20%)
Fair value through net income (default)
FV-OCI election (equity, no recycling)
VIE (any %)
Primary beneficiary test: power + economics
Consolidate if primary beneficiary
Cash Flow Classification
Does the cash flow relate to buying/selling long-term assets or investments?
NoDoes the cash flow relate to issuing/repaying debt or equity?
NoOperating activity (default — if it doesn't fit investing or financing)
Goodwill (Acquisition Method)
Goodwill = Consideration Transferred + FV of NCI + FV of Previously Held Interest − FV of Net Identifiable Assets
If result is negative, recognize a bargain purchase gain after reassessing measurements
Key IFRS vs. GAAP Differences
| Topic | U.S. GAAP | IFRS |
|---|
| LIFO inventory | Permitted | Prohibited |
| Inventory write-down reversal | Not permitted (FIFO/WA) | Permitted up to original cost |
| Development costs | Expense as incurred | Capitalize if 6 criteria met (IAS 38) |
| PP&E revaluation | Not permitted (historical cost) | Permitted (revaluation model, IAS 16) |
| Long-lived asset impairment reversal | Not permitted | Permitted (except goodwill) |
| Component depreciation | Permitted, not required | Required for significant components |
| Contingent liability threshold | Probable (>75%) | Probable (>50%) |
RICERevenue, Inventory changes, COGS adjustments, Expenses
Order of indirect method operating cash flow adjustments: start with net income, then adjust for non-cash items using RICE.
TIPARATechnical feasibility, Intention to complete, Probable future benefits, Ability to use/sell, Resources available, Ability to measure costs
The six criteria for capitalizing development costs under IFRS (IAS 38). Under GAAP, development costs are always expensed — this mnemonic is for IFRS differences only.