Deck 9 Flashcards
Fair value is:
an exit price (the price to sell an asset or transfer a liability), not to acquire assets.. Fair value includes transportation costs, but not transaction costs.
The level in the fair value hierarchy of a fair value measurement is:
Determined by the level of the lowest level significant input.
Input Levels of measurement:
Level 1 inputs are the most reliable fair value measurements. The measurements are quoted prices in active markets for identical assets and liabilities.
Level 2 measurements are quoted prices in active markets for similar assets and liabilities.
Level 3 fair value measurements are based on managements assumptions only. This is acceptable when there is no level 1 or 2 inputs or is costs too much to get level 1 or 2 inputs.
Fair value measurement approaches:
Income Approach - coverts future amounts, including cash flows or earnings to a single discounted amount to measure fair value.
Market Approach - uses prices and other relevant information from identical or comparable market transactions to measure fair value.
Cost Approach - uses current replacement costs to measure fair value.
Capital ratios are inappropriate to reflect operating effectiveness of the old partners, thus:
Bonus paid has the same impact as additional net income, and is shared in the old profit and loss ratio.
Weighted average capital balance is calculated by:
Taking each transaction and times the months that past between transactions.
For a trouble debt restructuring that involving term modifications:
The total future cash flows is compared to the carrying amount of the debt to determine the gain.
When a note contains either no interest or low interest rate or the term is less than a year:
You determine the present value at market interest rate and record the receivable or payable at face value, not present value.
To get the present value of a note take:
The total amount due at maturity, including interest overt the term of the note.
Interest expense on a note is based on:
The present value of the note at that date.
Current liability in reference to a note payable is:
The current portion of the principal outstanding and accrued interest for the remainder of the year.
Of the total payroll tax liability the:
Employer matching FICA is a payroll expense for the employer.
Only footnote disclosures are required for:
A “reasonably possible” (not probable) loss. No amount is accrued for reasonable possible.
Subsequent events that provide information about conditions that occurred after the balance sheet date and did not exist at the balance sheet date are:
Non recognized subsequent events. This type of subsequent event is not recognized in the financials, but they are disclosed in the notes.
The fair value of financial instruments may be disclosed in wither:
The body of the financials or in the footnotes. And both the carrying value and the fair value must be disclosed.
