ACC 440 Final Flashcards
Investing activities
Purchasing and selling long term assets, investments, marketable securities, and making and collecting loans
Fair value
The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
What a dealer would pay for something
An exit price
Non financial fair value
Considers something’s highest and best use
Ex land that can have a building put on it
Costs considered in determining fair value
Transformation- costs to recondition the asset
Transportation- costs to move the asset
NOT transaction costs
Levels in determining fair value
1- all fair value is coming out of market value without your judgement
2- market value inputs with some judgement put on top of that
3- you are coming up fair value using your own judgements and forecasts
Valuation premises
Highest and best use of the asset by market participants that would maximise the benefit or value of the asset
Valuation technique
Objective is to estimate the price to sell the asset or to transfer the liability
Market approach
Uses prices and other relevant information generated by market transactions
Income approach
Converts cash flows or earnings based on current market expectations to a single present amount
Cost approach
Amount currently required to replace service capacity of an asset
Additions on operating activities
- Accounts receivable \+ Accounts/ tax payable -Inventory - Prepaid Expense Depreciation/Amortization/compensation expense Loss on investment on stock Loss on sale or impairment of assets \+ Deferred tax liability Amortization of discount on bonds payable Dividends received on stock
Changes to financing activities
\+ sale of treasury stock \+ issuance of common stock - dividends paid - payment on lease - payment of debt
Recording refund received after a swap settlement
DR Cash
CR Interest expense
3 types of market risks
Interest rate- fixed interest payments if interest rates go down, will be lower for new borrowers
Foreign currency- building inventory in one country and selling in another
Commodity- fuel prices for an airline going up when theyve already sold tickets at fixed price
JE to purchase call options
DR Marketable Securities Trading
CR Cash
