Section 1: 30–40%1A7
Notes to the Financial Statements
Exam insight
Segment reporting comes down to the quantitative thresholds - 10% revenue, 10% profit/loss, 10% assets - and questions like to combine them in ways that are easy to misread. In interim reporting, the thing that catches people is the effective tax rate. Each quarter uses the estimated annual effective tax rate (AETR), not the statutory rate, so anyone who reaches for the statutory rate gets it wrong every time.
What AICPA wants you to know
- 1Identify the required notes under US GAAP and understand the 'full disclosure' principle
- 2Describe the required content of the Summary of Significant Accounting Policies note
- 3Apply fair value disclosure requirements (ASC 820 three-level hierarchy in the notes)
- 4Recognize what triggers required disclosure vs. accrual for contingencies and commitments
- 5Identify when segment information is required and what must be disclosed
- 6Explain subsequent events disclosure requirements
Patterns in this topic
The exam re-skins the same archetypes. Recognize these here, then drill them in the Pattern Lab.
Adjust or DiscloseIf the condition existed at year-end, adjust; if it arose afterward, disclose only.The Public Company RulebookSEC filings, interim reporting, and segments run on bright-line numbers: 10-K audited, 10-Q reviewed, 8-K in four business days, AETR each quarter, and the 10 and 75 percent segment tests.The Level GameLevel 1 is a quoted price for the identical asset in an active market; anything less observable slides down the ladder.
Exam tip
Study smarter: before you expand each card, cover the screen and try to recall what the concept means from its title alone. Retrieving it from memory builds the recall the exam actually tests, and it beats re-reading.