Question

Your audit team is reviewing the second quarter financial statements of Sparks, Inc., a publicly traded company. The audit senior, Will, thinks the client may have omitted an important item and has asked you to research whether interim financial statements are required to include earnings per share amounts. Prepare an email responding to Will’s question. Comment on any other potential ramifications of Sparks, Inc.’s omission that come to mind, which you can offer to research.

Answer 1

Hello Mr . Will ,

In regard to the Interim Financial Reports of Sparks Inc., the company is required to disclose the Earnings per share in its Interim Financial Statements as per the provisions.

As per ASC 270 , If the entity falls within the scope of ASC 260 Earnings per Share, then it is required to present the basic and diluted earnings per share for such interim period in the statement of profit or loss.

So It is an important item to check out for in the Interim financial statements

Here are some other points where the company may have potential ramifications and we can research on the following aspects :

1. New or complex revenue recognition methods

2. Changes in litigation or contingencies

3 Changes in related parties or significant new related-party transactions

4 Material off-balance-sheet transactions, special-purpose entities, and other equity investments

5 Changes in major contracts with customers or suppliers

6    Changes in accounting principles or the methods of applying them

7 Use of derivative instruments and hedging activities

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