27 Flashcards

deck 27

1
Q

where do effective/ineffective portions of a CF hedge go?

A
  • ineffective = NI

* effective = OCI

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

what are the off-BS risks of acct loss from interest rate swap agreements?

A
  • credit risk (nonperformance of counterpart)

- market risk (risk of exch’ing lower rate for higher)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

what do derivatives include?

A

futures, forwards, options, and swaps

*not bank cert. of deposits

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

what is a perfect hedge?

A

no future G/L

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

what is the best description of a derivative fin. instrument?

A

a contract that has its settlement value tied to an underlying notional amt

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

what is the rule for functional currency of an entity?

A

it is generally the environment the entity primarily generates and expends cash

*not subject to an inflationary environment (100% in 3+ years)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

what are the conversion rates used in translation method?

A
  • IS = WA rate

*BS =YE rate, but
… SE + APIC = HC rate
… roll forward RE

G/L goes to OCI

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

what are the conversion rates used in remeas. method?

A
  • 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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

balance from translation/remeas. of sub’s foreign currency FS’s is reported in consol. IS when sub’s fxn’al currency is the:

A

reporting currency, not foreign

*if sub’s fxn’al currency is its local, translate to reporting

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

what rate is used to record a transaction denominated in a foreign currency?

A

the spot rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

resulting A/L from expected svc income over expected costs are amort’d over:

A

period of est’d svc income or loss

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

what do perm. diff’s affect?

A

they affect current tax computation, not def’d

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

what do temp. diff’s affect?

A

both current and def’d tax computation

*JE:
Dr: tax exp (now + later)
Cr: owe now/L
Cr: owe later/L

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

what is the formula to get ITE/ben?

A

owe now + owe later (change) = ITE/ben

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

what tax rate is used for TD?

A

we use future enacted TR

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

what are ex’s of PD?

A
  • tax-exempt int. (muni, state)
  • life ins. proceeds on officer’s key man policy
  • life ins. prem’s when corp. is beneficiary
  • penalties, fines, bribes, kickbacks, etc
  • nondeductible portion of meal +entertainment exp
  • DRD for corp’s
  • excess % depletion over cost depletion

*invest int exp is deductible up to net invest inc

17
Q

what are the ex’s of DTA and DTL items? (TD ex’s)

A

*DTA = PPD/unearned rent/int/royalties, BDE, est. L/warranty exp, def’d comp. L, and start-up exp’s
…they result in a “gift cert” and pay taxes early (higher TI)

*DTL = installment sales, contractors acct (% vs completed), equity method (undistr’d div’s), DE, amort, PPD exp (cash basis - tax)
…pay taxes later (lower TI)
.. DTL also includes increase in rent receivable

18
Q

what is the JE to record taxes for DTL TD?

A

*to record taxes:

ITE - current 60 (TI*%)
ITE - def’d 7.5 (TD)
DTL 7.5
IT/P 60

*to record Y2 reversal of DTL:

DTL 7.5
ITB - def’d/cash 7.5

19
Q

if DTA is more likely than not (50%+) that part/all of DTA will not be realized, what do we report?

A

a VA is recog’d

  • not permitted under IFRS
20
Q

what is the JE to record taxes for DTA TD?

A

*to record taxes:

         DTA    90 ITE - current    240
              IT/P         240
         ITB - def'd    90

*if no TI is expected after Y2:

             DTA    90
ITE - current  240
       DTA  VA        60 (unused)
          ITB - def'd   30
                  IT/P   240

..usually ITE-c and VA are netted

*for reversal of DTA:
(gift cert.)
ITE def’d 30
DTA 30