#financial-statements
Understand and prepare balance sheets, income statements, and cash flow reports
Under ASC 805-50, sister-company transfers book at the parent's carrying amount — no step-up, no goodwill — with prior periods restated.
Functional currency is the currency of an entity's primary economic environment — and it decides whether FX differences land in equity or net income.
Channel stuffing books revenue on shipments distributors cannot sell — watch DSO, receivables outpacing sales, and next-quarter returns.
Input methods track effort in, output methods track value out — choose the ASC 606 progress measure that fits the contract and reconcile billings monthly.
The 10-column worksheet turns raw ledger balances into statements: add adjustments, prove the adjusted balances, extend each account to its statement.
Negative working capital means current liabilities top current assets — a warning, unless prepayments or supplier terms fund you. Four questions tell which.
Deferred taxes are timing gaps between book income and IRS taxable income — depreciation creates future bills, reserves and NOLs create future savings.
The excess earnings method prices goodwill as profit above a fair return on tangible assets, capitalized at 15-20% — then adds tangibles for total value.
Under ASC 205-40, management must test whether the business can pay its bills for a year after issuance — and disclose substantial doubt either way.
Appraisers value private companies off public trading multiples and past deals, then add a 20–40% control premium and subtract marketability discounts.
A write-down cuts an asset to recoverable value; a write-off removes it entirely. The IRS deducts only specific worthless debts under Section 166.
Auditors test five claims — existence, completeness, valuation, rights, disclosure — through confirmations, observation, and sampling. What each checks.
