27 Flashcards
deck 27
where do effective/ineffective portions of a CF hedge go?
- ineffective = NI
* effective = OCI
what are the off-BS risks of acct loss from interest rate swap agreements?
- credit risk (nonperformance of counterpart)
- market risk (risk of exch’ing lower rate for higher)
what do derivatives include?
futures, forwards, options, and swaps
*not bank cert. of deposits
what is a perfect hedge?
no future G/L
what is the best description of a derivative fin. instrument?
a contract that has its settlement value tied to an underlying notional amt
what is the rule for functional currency of an entity?
it is generally the environment the entity primarily generates and expends cash
*not subject to an inflationary environment (100% in 3+ years)
what are the conversion rates used in translation method?
- IS = WA rate
*BS =YE rate, but
… SE + APIC = HC rate
… roll forward RE
G/L goes to OCI
what are the conversion rates used in remeas. method?
- BS = monetary at YE rate
… nonmonetary at HC rate (FA, inv, invest, IA, CS) - IS = WA rate
… HC rate for BS related items (DE, COGS, amort)
G/L goes to NI
balance from translation/remeas. of sub’s foreign currency FS’s is reported in consol. IS when sub’s fxn’al currency is the:
reporting currency, not foreign
*if sub’s fxn’al currency is its local, translate to reporting
what rate is used to record a transaction denominated in a foreign currency?
the spot rate
resulting A/L from expected svc income over expected costs are amort’d over:
period of est’d svc income or loss
what do perm. diff’s affect?
they affect current tax computation, not def’d
what do temp. diff’s affect?
both current and def’d tax computation
*JE:
Dr: tax exp (now + later)
Cr: owe now/L
Cr: owe later/L
what is the formula to get ITE/ben?
owe now + owe later (change) = ITE/ben
what tax rate is used for TD?
we use future enacted TR