CFA-Financial reporting

The Statement of Comprehensive Income reports all changes in equity except for shareholder transactions (e.g., issusing stock, repurchasing stock, and paying dividends).

The objective of an audit is to enable the auditor to provide an opinion on the fairness and reliability of the financial statements.

• Unqualified opinion: the auditor believes that the statements are free from material omissions and errors
• Qualified opinion: make exceptions to the accounting principals
• Adverse opinion: the statements are not presented fairly or are materially nonconforming with accounting standards
• Disclaimer of opinion: the auditor is unable to express an opinion (e.g. in the case of scope limiation)

Important information about accounting methods, estimates, and assumptions is disclosed in the footnotes to the financial statements and supplementary schedules.

Proxy statements contain information related to matters that come before shareholders for a vote, such as elections of board members.

Owners’ equity is the owners’ residual claim on a firm’s resources, which is the amount by which assets exceed liabilities:

• Capital: par value of common stock
• Additional-paid-in capital: proceeds from common stock sales in excess of par value
• Retained earnings: Cumulative net income that hasn’t been distributed as dividends
• Other comprehensive income: Changes resulting from currency translation, minimum pension liability adjustments, or unrealized gains and losses on investments

assets=liabilities+ contibuted capital+ending retained earnings
=liabilities+ contributed capital + beginning retained earnings+revenues-expenses-dividend

Comprehensive income

Comprehensive income is the sum of net income and other comprehensive income. It measures all changes to equity other than those from transactions with shareholders.
comprehensive income=net income+ other comprehensive income

Transactions with shareholders, such as dividends paid and shares issued or repurchased , are not reported on the income statements.

Other comprehensive income:

• Foreign currency translation gains and losses
• adjustments for minimum pension liability
• unrealized gains and losses from cash flow hedging activities
• unrealized gains and losses from available-for-sale securities

Annual depreciation is an expense. Accumulated depreciation is a contra asset account that typically offsets the historical cost of property, plant , and equipment.

IASB and FASB framework

The IASB and FASB framework are similar but are moving towards convergence. Some of the remaining differences are:

• the IASB lists income and expenses as performance elements, while the FASB lists revenues, expenses, gains, losses, and comprehensive income
• there are minor differences in the definition of assets. Also, the FASB uses the word probable when defining assets and liabilities
• the FASB doesn’t allow the upward revaluation of most assets

In accounting/accountancy, adjusting entries are journal entries usually made at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred.

Understanding income statement

Expenses:
Group by nature: presenting all depreciation expense from manufacturing and administration together in one line of income statement
Group by function: combing all costs associated with manufacturing as cost of goods sold

Bank overdraft: 银行透支
银行透支是指银行允许其存款户在事先约定的限额内，超过存款余额支用款项的一种放款形式。
An overdraft is an extension of credit from a lending institution when an account reaches zero. An overdraft allows the individual to continue withdrawing money even if the account has no funds in it or not enough to cover the withdrawal. Basically, overdraft means that the bank allows customers to borrow a set amount of money.

Under US GAAP, bank overdrafts are not considered part of cash and cash equivalents and are classified as financing cash flows.