Deck 26 Flashcards
Contingencies losses will only be accrued when the loss is:
Estimable and “probable”; if “possible” then disclose
4 types of derivatives (OFFS)
Options, futures, forwards, swaps
Disclosure of market risk vs. credit risk:
Credit risk: required; Market risk: required only for IFRS
Three necessary characteristics for a derivative:
1) one or more underlyings and notional amounts; 2) no initial net investment; 3) requires or permits a net settlement
Underlying vs. notional amount
Underlying: specified price or rate; Notional: Specified unit of measure used to calculate gain/loss
Put vs. call option
Call option: gives the holder the right to buy; Put: gives the holder the right to sell
Fair value vs cash flow hedge:
Fair value: Firm commitment, income statement; cash Flow: forecasted transaction, OCI
Difference between ineffective and effective portion of cash flow hedge:
Ineffective: income statement; Effective: OCI
Do you recognize the conversion feature for convertible bonds? (GAAP vs. IFRS)
Gaap: No; IFRS: Yes
When is the liquidation basis of accounting used?
When liquidation is imminent; applied prospectively
Holding gain on inventory =
Replacement cost - original purchase price
Definition of a bargain purchase
FV of net assets acquired is more than the consideration exchanged for the net assets
What method should be used to account for an investment that is non-voting?
Cost method
LIFO method
Last amount of inventory purchased is the first to be sold
FIFO method
First amount of inventory purchased is the first to be sold
Conversion of bonds into common stock - Journal entry
Dr. Bonds payable; Cr. Unamortized discount, common stock, and APIC
Restricted funds for principal and interest payments should be accounted for in what fund?
Debt service fund
What is the initial net investment for a forward contract?
Zero
Financial statement requirements for GAAP and IFRS?
IFRS: 3 B/S and 2 for all other statements; GAAP: 2 B/S and 3 for all other statements
Potentially dilutive securities include:
Convertible securities, warrants, contracts settled in cash or stock, and contingent shares
Donated capital assets to a governmental unit are recorded at:
Estimated fair value when received
