CPA - FAR (F2) QUESTIONS &
ANSWERS.
F2 - M1 - Notes to financial statements ANS -
Summary of significant policies ANS -1) Measurement bases used
2) Specific accounting principles and methods used
Significant accounting policies should be included as ANS -The first or second note to the financial
statements
Significant accounting policies DOES NOT include (4) ANS -1) Detailed dollar amounts of balances
2) Details relating to changes in principles
3) Dates of maturity and amounts of debt
4) Yearly computation of depreciation
Required disclosures (4) ANS -1) Nature of operations
2) Use of estimates in preparation of financials
3) Certain significant estimates
4) Current vulnerability due to certain concentrations
Nature of operations ANS -Description of the entity's major products or services, principal markets, and
location of markets
Certain significant estimates ANS -When it is reasonably possible that an estimate will change in the
near term and the effect will be material, an estimate of the effect should be disclosed
Current vulnerability due to certain concentrations ANS -Arise when an entity is exposed to risk of loss
that could be mitigated through diversification
, F2 - M2 - Going Concern ANS -
Going concern ANS -The entity is reasonable expected to remain in existence
If an entity's liquidation is imminent, financials are prepared under ANS -The liquidation basis of
accounting (compared to the going concern of accounting)
Management is required to evaluate going concern ANS -Within one year after the date that financial
statements are issued
Substantial doubt of going concern exist when ANS -Conditions and events indicate it is probable (likely
to occur) that the entity will not be ale to meet its obligations as they become due within one year of FS
issuance
Managements evaluations of going concern should be both ANS -Qualitative and quantitative
The effectiveness of mitigating against conditions should be evaluated based on (2) ANS -1) Whether it
is probable the plans will be effectively implemented
2) Whether the plan will be successful
Disclosure for no substantial doubt of going concern ANS -No disclosure, continue as going concern
Disclosure for substantial doubt alleviated by mitigation ANS -Disclose conditions and plans that
successfully mitigated, report as going concern
Disclosure for substantial doubt not alleviated by mitigation ANS -Disclose conditions and plans that will
not be successful, report as going concern
F2 - M3 - Subsequent events ANS -
Subsequent event ANS -An event that occurs after the BS date but before the FS are issued
ANSWERS.
F2 - M1 - Notes to financial statements ANS -
Summary of significant policies ANS -1) Measurement bases used
2) Specific accounting principles and methods used
Significant accounting policies should be included as ANS -The first or second note to the financial
statements
Significant accounting policies DOES NOT include (4) ANS -1) Detailed dollar amounts of balances
2) Details relating to changes in principles
3) Dates of maturity and amounts of debt
4) Yearly computation of depreciation
Required disclosures (4) ANS -1) Nature of operations
2) Use of estimates in preparation of financials
3) Certain significant estimates
4) Current vulnerability due to certain concentrations
Nature of operations ANS -Description of the entity's major products or services, principal markets, and
location of markets
Certain significant estimates ANS -When it is reasonably possible that an estimate will change in the
near term and the effect will be material, an estimate of the effect should be disclosed
Current vulnerability due to certain concentrations ANS -Arise when an entity is exposed to risk of loss
that could be mitigated through diversification
, F2 - M2 - Going Concern ANS -
Going concern ANS -The entity is reasonable expected to remain in existence
If an entity's liquidation is imminent, financials are prepared under ANS -The liquidation basis of
accounting (compared to the going concern of accounting)
Management is required to evaluate going concern ANS -Within one year after the date that financial
statements are issued
Substantial doubt of going concern exist when ANS -Conditions and events indicate it is probable (likely
to occur) that the entity will not be ale to meet its obligations as they become due within one year of FS
issuance
Managements evaluations of going concern should be both ANS -Qualitative and quantitative
The effectiveness of mitigating against conditions should be evaluated based on (2) ANS -1) Whether it
is probable the plans will be effectively implemented
2) Whether the plan will be successful
Disclosure for no substantial doubt of going concern ANS -No disclosure, continue as going concern
Disclosure for substantial doubt alleviated by mitigation ANS -Disclose conditions and plans that
successfully mitigated, report as going concern
Disclosure for substantial doubt not alleviated by mitigation ANS -Disclose conditions and plans that will
not be successful, report as going concern
F2 - M3 - Subsequent events ANS -
Subsequent event ANS -An event that occurs after the BS date but before the FS are issued
