F3 Flashcards
What is a Trading Security?
A Current Asset. Debt & Equity held for sale
What is an Available for Sale (AFS) Security?
GR: Non-Current Asset. Debt & Equity that is not Trading or HTM
What is a Held to Maturity (HTM) Security/
GR: Non-Current Asset. Debt ONLY with intent and ability to hold to maturity
What are the 3 classifications of securities under IFRS?
Financial Assets at FV through P/L, AFS, HTM
Under IFRS, what are Financial Assets at FV through P/L Securities?
Held for Trading (like GAAP) or Assets designated as investment at FV through P/L using FV option
How are Trading Securities valued?
at FV. Record Unreal G/L in IDEA
How are AFS Securities valued?
at FV. Record Unreal G/L in OCI: PUFE
How are AFS Securities valued in IFRS?
AFS to OCI except foreign exchange G/L for debt securities to IDEA
How are HTM Securities valued?
at amortized cost
What is the difference between GAAP (P/L) and Tax Return (nontaxable until sold)?
deferred taxes
When reclassifying Securities FROM TRADING, how do you adjust unreal G/L?
no adjustment
When reclassifying Securities TO TRADING, how do you adjust unreal G/L?
Recognize unreal G/L in earnings
When reclassifying Securities FROM HTM TO AFS, how do you adjust unreal G/L?
record in OCI
When reclassifying Securities FROM AFS TO HTM, how do you adjust unreal G/L?
Amort G/L from OCI to I/S
With an impairment loss, if the FV decrease is permanent, where do you record the write down?
I/S
Under IFRS, what is the difference with Securities impairment losses?
may be reversed
Where is the sale of a security reported?
on I/S
What are the income tax effects of sale of a security?
mark to market
What are consolidated financial statements?
an economic truth, but a legal fiction
What are the criteria for when to/not to consolidate?
consolidate ALL majority owned subs to have one management and one economic entity. DO NOT consolidate when control is not with owners. Can consolidate companies with different year ends
Compare GAAP vs. IFRS for consolidating companies with different year ends.
GAAP (DISCLOSE significant txns during gap period) IFRS(adj sub F/S for significant txns during gap period)
What are the different degrees of control and what methods are used in external reporting for consolidations?
COST (50%, control)
What are the key points about the cost method?
investment is not adjusted for earnings, is adjusted to FV, dividends < RE are income
What constitutes significant influence?
majority of board, or largest S/H
What are the key points about the equity method?
like a bank account. BASE. Cost + earnings – dividends = end
What are stock dividends?
memo entries only
In the equity method, how is goodwill calculated?
Purchase Price – NBV – FV (amort, service charge) = excess (Goodwill)
What method do joint ventures use?
equity method for GAAP & IFRS
How do you record Cost to Equity method change?
recalculate last year % by using “what-if” equity method (GAAP only)
What are the exceptions under GAAP for required consolidation for >50% ownership?
not required with reorganization or bankruptcy
What are the exceptions under IFRS for required consolidation for >50% ownership?
not required if parent is a sub, parent is not public, AND the parent’s parent produced consolidated IFRS statements
What are the fundamental principles of the acquisition method?
recognition principle (recognize everything) measurement principle (at 100% FV)
What is the journal entry accounts for the acquisition method?
CAR IN BIG!
What is CAR?
C/S, APIC, R/E. (sub’s old books eliminated, NBV)
What is IN?
Inv in Sub & NCI
What is BIG?
BS to FV, Identifiable Intangible A @ FV, and Goodwill (gain) plugged
How is the acquisition journal entry recorded?
CAR (DR) + BIG (DR) = IN (CR)
If control % changes, how is non control to control reported?
previous C/S to FV & recog in I/S
If control % changes, how is change in control reported?
equity txn, record in APIC (like treasury stock)
If control % changes, how is control to non control reported?
Sale G/L and adj remaining C/S to FV (record both on I/S)
Which intercompany transactions are eliminated for external reporting
ALL
