16

Question 1

when transferring FINANCIAL assets, how do you record?

Answer 1

allocate previous CV of entire fin. asset b/w both of these on relative FV’s at date of transfer:

(1) participating int(s) sold
(2) participating int. that continues to be held by transferor

Question 2

what would cause a bonds’ decline in market value?

Answer 2

interest rates increasing since purch. of bond

Question 3

how do you calc. the investment in bonds?

Answer 3

• interest revenue - interest receivable = discount amort’d
• CV YE = discount amort’d + CV bond on BB date
• int rev = CV bond*yield
• int rec.= face*face rate

Question 4

how are unrealized G/L reported?

Answer 4

TS = FV to IS, AFS = FV to OCI

Question 5

what is the rule for dividend revenue?

Answer 5

div. revenue under FV method should be recog’d to extent of cumu. earnings since acq. and return of cap. beyond that point (div’s not in excess of undistr. earnings = DI)

Question 6

what is the reporting for marketable debt sec’s that the company has intent and ability to hold to maturity?

Answer 6

both LT and ST are reported at CV (amortized cost) UNLESS there is a perm. decline in market value

Question 7

what is the treatment for impairment of AFS debt sec. that is perm.?

Answer 7

write down the asset to lower FV and record loss on IS

Question 8

what disclosures of risks are required for most fin. insturments?

Answer 8

conc. of credit risk is req’d, market risk is ENCOURAGED
. conc. of credit risk is disclosed in NOTES to FS’s

*CV and FV are disclosed for most FS’s too

Question 9

what is the FV option?

Answer 9

follows same rules as TS’s. eligible for AFS and equity -sig infl.

Question 10

what is excluded for FV option?

Answer 10

invest in sub’s, pen. ben A/L, A/L recog’d under leases

Question 11

how are equity sec. G/L reported?

Answer 11

they are reported as unrealized G/L on the IS as they occur

Question 12

when do you realize a G/L?

Answer 12

upon sale. brokerage fees are included in realized losses

Question 13

what is the exception to not consolidating a majority-owned sub?

Answer 13

when the sub is in legal reorg. or bankruptcy or operates under severe foreign currency exch. restrictions

Question 14

when a P-S relationship exists, consol. FS’s are prep’d in recognition of the acct concept of:

Answer 14

economic entity (ID’d w./ a unit of acct’ty)

Question 15

what is the rule for a sub owning 50%+ of another sub?

Answer 15

vertical chain: 3rd co. into sub, then sub into P

Question 16

what is a char’ of primary ben. of a VIE?

Answer 16

• right to rec. expected VIE residual returns
• obligation to absorb expected VIE losses
• power to direct act’s of VIE

Question 17

what does not represent variable interests?

Answer 17

ST liabilities (A/P), but most liabilities rep. VIE

Question 18

what would indicate that an entity has an insufficient level of equity investment at risk?

Answer 18

when the entity’s equity invest at risk is LESS THAN the equity invest at risk of similar non-VIE entities

Question 19

under IFRS, when does a sponsoring company have to consol. a SPE?

Answer 19

if the company “controls” the SPE (control = co. ben’d from act’s, decision making power, and absorb risks and rewards and has residual int)

Question 20

what disclosures does an entity have to make with an equity method investment in another company?

Answer 20

they only need to disclosure the company’s acct policy

*they do NOT need names, reason, or litigation info