25 Flashcards
deck 25
if coupon rate and market rate at issuance is closer, is the amount of amortization lower?
yes, it is lower
- farther apart rates means higher amort.
who does a callable bond provide an option for?
the issuer, not bondholder
*a puttable bond provides option to bondholder
is calling a bond more attractive when interest rates move lower?
yes
what does an in-substance defeasance do?
it “freezes” the pmt of “P”+int, but does not extinguish the liability
how is total accretion exp calc’d?
total est cost - total dep (ARO)
how does YE accretion exp and DE affect ARC and ARO?
accretion exp increases ARO and DE decreases ARC
in a non-monetary exch that lacks comm. subs, how is the asset valued?
it is valued at CV given up
which item is included in both retail inv and cost method calculations?
purchase returns
what is statutory consol. and merger?
- statutory consol = merging of 2 co’s into entirely new co.
* statutory merger = merging of 2 co’s into 1
an entity must classify as a liability a fin. instrument at inception when:
(both)
*embodies an obl. to repurch the issuer’s equity shares
*(may) req’s issuer to settle obl. by transferring assets
impaired HFS is valued as:
lower of NRV or CV
what are the 3 classes of freestanding fin. instruments?
(1) mandatorily redeemable fin. instruments
(2) obl’s to repurch the issuer’s equity sh’s by transferring assets
(3) certain obl’s to issue a variable number of sh’s
is troubleshooting considered R+D costs?
no, it isn’t
what is the treatment of a nonrefundable lease bonus paid by lessee on signing an op. lease?
recog. income over life of lease
how are leasehold improvements amort’d?
over the lesser of the remaining life or life of improvement
- if renewal option is uncertain, do not factor it in for amort.
- *if certain, add add’l life and if still lower, then use the new life
how is rent exp. for the year calc’d with free/reduced rent part of the lease package?
*monthly rent to be paid * rent pmts = total rent to be paid
** total rent to be paid / months in lease = monthly rent exp
***monthly rent exp * months in CY = rent exp for CY
what is the rule for op. leases for lessee in regards to increase in annual pmt’s?
- lessees should recog. op. leases as rent exp. using SL even if using another basis
- there is no int. component in op leases
what is the req’d disclosure for op. leases?
(for terms 1+ years)
they must disclose the future min. lease pmt’s for 5Y’s and the aggregate of min lease pmt’s
(for all other op leases)
- schedule of total rent exp
- all discl’s need to disclose rent kicker, terms of renewal, restrictions, etc.
how is income for lessor calc’d?
monthly rents + bonus amort - DE = income
how is int rev calc’d in a direct financing lease?
total CF’s- PV CF’s = int rev
