Overview
Footnotes to financial statements provide additional information or details to clarify figures. They refer to additional information that helps explain how a company arrived at the numbers outlined in the data. They also help to explain any irregularities or perceived inconsistencies in the account, from one year to another. Review the Supporting Materials section to see examples of footnotes in an 8-K report for a well-known organization.
In this assignment, you will create footnotes to support financial data. This assignment will help you complete Project One, where you will complete consolidated balance sheets.
Directions
Part One: Footnotes
Use data from your textbook, Illustration 2-5 P Company Pro Forma Balance Sheet, linked in the Supporting Materials section, to create an applicable footnotes page. Pay particular attention to adjustments that stand out and may require footnotes.
Part Two: Financial Accounting Standards Board (FASB) Codification
Answer the questions from your textbook, linked in the Supporting Materials section, to complete this assignment. Clearly label the questions you are answering for Part Two.
Specifically, you must address the following rubric criteria:
Part One: Footnotes
Identify four to five adjustments that require footnotes.
Explain irregularities based on the adjusted numbers using footnotes. Consider the following questions to guide your response:
What might be a potential reasonable explanation for the irregularity?
Why might certain original amounts in the audited balance sheet have previously been zero?
Provide a rationale for why the footnotes are required. Consider the following questions to guide your response:
What criteria did you use to determine that an adjustment needed a footnote?
What threshold number created a concern, and why?
Part Two: FASB Accounting Standards Codification (ASC)
Identify the correct codification topic, subtopic, section, and paragraph for each question to support your response. There is a total of four.
Evaluate a scenario regarding interim reporting (ASC13-1). Include the following details in your response:
Determine if the codification allows for exceptions at interim reporting dates.
Determine what effect differences in interim reporting have on evaluation methods employed by analysts and other users.
Explain whether it is appropriate to prorate an extraordinary loss in the second quarter over the three remaining quarters of the fiscal year (ASC13-3).
Determine if interim periods are considered standalone financial statements or an integral part of the annual financial statements under current Generally Accepted Accounting Principles (GAAP) (ASC13-5).
Explain if you agree or disagree with how interim periods are handled by GAAP (ASC13-5).
Explain whether additional disclosure requirements are necessary when a company presents only the annual income statement as opposed to a separate fourth‐quarter interim report (ASC13-6).
What to Submit
Submit your assignment as a 2- to 3-page Microsoft Word document with double spacing, 12-point Times New Roman font, and one-inch margins. Sources should be cited according to APA style.
Supporting Materials
The following resources support your work on the assignment:
Textbook Data: Illustration 2-5 Company Pro Forma Balance Sheet
This illustration contains data to complete Part One.
Textbook Framework: FASB’s Conceptual Framework
Refer to Concepts Statement No. 3 when completing Part One.
Website: Form 8-K
This website provides the purpose of the Form 8-K and circumstances that require this form. This will help you with Part One.
Website: Target Form 8-K Reports
Review the example of different types of disclosures. This will help you with Part One.
Textbook Questions: Chapter 13 ASC Exercises
This contains all of the questions to complete Part Two: ASC13-1, ASC13-3, ASC13-5, ASC13-6.
Website: FASB Accounting Standards Codification
This website contains all of the codification codes and GAAP to complete Part Two. The following are access instructions:
Access the FASB Accounting Standards Codification website.
On the right side of the screen under Basic View, select I’m not a robot and pass through the reCAPTCHA system. Select Access the Basic View.
Accept the license agreement for the Basic View.
Find each topic/subtopic listed.
Find the coordinating codification code for each topic/subtopic. An example of this is: FASB ASC 850-10-05-03.
