16 Flashcards
deck 16
when transferring FINANCIAL assets, how do you record?
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
what would cause a bonds’ decline in market value?
interest rates increasing since purch. of bond
how do you calc. the investment in bonds?
- 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
how are unrealized G/L reported?
TS = FV to IS, AFS = FV to OCI
what is the rule for dividend revenue?
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)
what is the reporting for marketable debt sec’s that the company has intent and ability to hold to maturity?
both LT and ST are reported at CV (amortized cost) UNLESS there is a perm. decline in market value
what is the treatment for impairment of AFS debt sec. that is perm.?
write down the asset to lower FV and record loss on IS
what disclosures of risks are required for most fin. insturments?
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
what is the FV option?
follows same rules as TS’s. eligible for AFS and equity -sig infl.
what is excluded for FV option?
invest in sub’s, pen. ben A/L, A/L recog’d under leases
how are equity sec. G/L reported?
they are reported as unrealized G/L on the IS as they occur
when do you realize a G/L?
upon sale. brokerage fees are included in realized losses
what is the exception to not consolidating a majority-owned sub?
when the sub is in legal reorg. or bankruptcy or operates under severe foreign currency exch. restrictions
when a P-S relationship exists, consol. FS’s are prep’d in recognition of the acct concept of:
economic entity (ID’d w./ a unit of acct’ty)
what is the rule for a sub owning 50%+ of another sub?
vertical chain: 3rd co. into sub, then sub into P
what is a char’ of primary ben. of a VIE?
- right to rec. expected VIE residual returns
- obligation to absorb expected VIE losses
- power to direct act’s of VIE
what does not represent variable interests?
ST liabilities (A/P), but most liabilities rep. VIE
what would indicate that an entity has an insufficient level of equity investment at risk?
when the entity’s equity invest at risk is LESS THAN the equity invest at risk of similar non-VIE entities
under IFRS, when does a sponsoring company have to consol. a SPE?
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)
what disclosures does an entity have to make with an equity method investment in another company?
they only need to disclosure the company’s acct policy
*they do NOT need names, reason, or litigation info
