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FA 322 > Chapter 12 (handbook) > Flashcards

Chapter 12 (handbook) Flashcards

1
Q

US GAAP on investments

A

ASC Codification Topic 320

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2
Q

IFRS authoritative support on investments

A

IAS 39

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3
Q

What is the difference on reclassification between categories in IFRS IAS 39

A

(1) A reclassification INTO the fair value through profit or loss category (not allowed)
(2) A reclassification OUT OF the fair value through profit or loss category (not allowed)
but it is allowed with GAAP

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4
Q

Does IFRS allow fair value option of investments qualified as equity method

A

no

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5
Q

Does GAAP allowing fair value option of investments qualified as equity method

A

yes

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6
Q

GAAP classification of Investment securities

A

320

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7
Q

what are the requirements for trading securities

A

acquired with the intent of selling it within hours or days.

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8
Q

requirements for available for sale

A

debt and equity securities that have READILY DETERMINABLE FAIR VALUES not classified as trading securities or as HTM

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9
Q

requirements for HTM

A

debt securities if the reporting entity has the POSITIVE INTENT AND ABILITY to hold those securities to maturity

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10
Q

types of equity securities

A

CS, PS and other forms of capital stock.
rights to acquire ownership shares including: stock warrants, rights, and call options.
rights to dispose of ownership shares in the future

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11
Q

Equity securities DO NOT include

A

PS redeemable at the option of the investor or stock that must be redeemed by the issuer.
TS
Convertible bonds

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12
Q

What are TS classified in cash flows

A

operating

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13
Q

what are AFS classified in cash flows

A

Investing

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14
Q

what are HTM classified in cash flows

A

Investing

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15
Q

Where are Unrealized gains and losses reported for TS

A

current period earnings - net income

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16
Q

Where are unrealized gains and losses reported for AFS

A

OCI - AOCI

17
Q

Reclassification: From Trading to any other

A

the unrealized holding gain or loss at the date of transferred is already recognized in earnings and shall not be reversed

18
Q

Reclassification: From any other to Trading

A

recognized in current earnings (income) (because you haven’t recognized it yet)

19
Q

Reclassification: from HTM to AFS

A

record in OCI

20
Q

Reclassification: from AFS to HTM

A

Amortize gain or loss from OCI with any bond premium/ discount amortization over the remaining life of the security.

21
Q

OTTI of AFS

A

must be reflected in EARNINGS (income)

22
Q

what happens to subsequent recoveries in AFS for OTTI

A

previous permanent decline CANNOT be recognized in income UNTIL LIQUIDATED

23
Q

What happens to the OTTI loss AFS

A

recognized in earnings (net income)

24
Q

what happens to the carrying value of OTTI AFS

A

in the BS by that amount

25
Q

permanent Impairment of TS

A

does not arise, the distinction between realized and unrealized gains or losses does not exist for TS

26
Q

once OTTI is recognized for TS the reduced carrying value becomes..

A

the new cost basis from which other increases or decreases in value are measured

27
Q

Hedging TS

A

gains and losses that hedge TS should be reported in earnings, consistent with the recovery of unrealized gains and losses on TS

28
Q

Hedging AFS

A

gains and losses on derivative instruments that hedge AFS are recognized currently in earnings together wit offsetting losses or gains on the AFS securities attributable to the hedged risk

29
Q

Sale of a TS

A

realized gain and loss is recognized as the difference between the adjusted costs and selling price

30
Q

Sale of AFS

A

realized gain or loss is recognized as the difference between the selling price and original cost of the security. Any realized gains/losses in AOCI must be reversed at the time the security is sold

31
Q

required disclosures for AFS and HTM

A

aggregate fair value
gross unrealized and realized holding gains/losses
amortized cost by major security type
information about the contractual maturities and debt securities

32
Q

up and downs of equity method investors

A

up for net earnings and down for investee dividends paid

33
Q

equity method includes

A

common stock not preferred stock

34
Q

equity method has none of what

A

dividend revenue

35
Q

Significant influence:

A 
representation on BOD
participation in policy making processes
material intra entity transactions
interchange of managerial personnel
technological dependency

FA 322 (4 decks)

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