F4 Flashcards
DEbt securities on the balance sheet classified as trading or available for sale are valued how?
fair value
On what statement are unrealized gains/losses on debt securities classified as trading securities recognized
income statement
How are unrealized gains/losses on debt securities classified as Available for sale securities recognized
OCI baby
DEbt securities on the balance sheet classified as held-to-maturity are valued how?
amortized cost
List the three conditions when losses on debt securities classified as Available for sale are recognized in income on the IS, and NOT in OCI
when the security is sold, it becomes a trading security, or there is an OTTI decline in value to below cost (impairment)
When a marketable security is transferred from trading to available for sale or vise versa at what cost is it being transferred
its transferred at Fair Value, which is the new basis.
How do you calculate the realized gain or loss calculated for trading & equity securities when they are sold
Original cost +/- adjusted cost (which is the unrealized gains or losses previously recognized in NI)
How do you calculate the realized gain or loss calculated for Available For Sale Securities when they are sold
Selling price +/- the original cost
How are equity securities typically valued
carried at fair value through net income with unrealized gains and losses included in earnings
Describe the practicality excepition for equity securities
its for securities that dont have a readily determinable FV, exceptions allow for the entity to measure them at cost less impairment, of identical or similar investments
How are nonliquidating and liquidating dividends distributed by equity securities by the person receiveing them
nonliquidating dividends are recorded as dividend income
Liquidating dividends received are recorded as a return of capital
How do you calculate year-end investment in investee reported on the BS under the equity method
Beginning investment in invest
ADD: Investors share of investee earnings
LESS investors share of investee dividends
LESS amortization of FV differences
=Ending investment in investee
How do you calculate an investors equity method investment reported on the income statement
Investors share of investee earnings
LESS amortization of FV differences
=equity in earnings / investee income
What are some of the criteria for consolidating subsidiaries
parent controls more that 50% of sub
What is a variable interest entity
its a business that doesnt have investors with voting rights or lacks sufficient financial resources to support acitivites
In aquistion accounting state the consolidating workpaper elimination entry
CARINBIG
Dr: Common stock - sub Dr: APIC - sub Dr: RE - sub Cr: Investment in sub Cr: Noncontrolling interest Dr: Balance sheet adjustment to FV Dr: Identifiable intangible assets to fair value Dr: Goodwill
How is noncontrolling interest as of the acquisition date calculated under GAAP (Balance Sheet)
Non-controlling intrerest = FV of subsidiary x NCI %
How is noncontrolling interest on the income statement calculated
Subsidiary net income x Noncontrolling interest % = NCI in net income
How is noncontrolling interest as of the acquisition date calculated under IFRS (Balance Sheet)
there are two methods: full goodwill or partial goodwill
Full Goodwill: FV of subsidiary x NCI %
Partial Goodwill: FV of subs net identifiable assets x NCI % or Acquistion cost - FV of net assets required
How is goodwill calculated under GAAP
FV of Sub - FV of subs net assets
What is the elimination entry for intercompany inventory transactions
Dr: RE Dr: Intercompany Sales Cr: Intercompany COGS Cr: COGS Cr: Ending inventory
What is the elimination entry for intercompany bond transactions
Dr: Bonds PAyable
Dr: Premium (or credit discount)
Cr: Investment in affiliates bonds
Cr: gain on extinguishment of bonds
What is the elimination entry for intercompany depreciable assets transactions
DR: intercompany gain on sale
Cr: Machine
Cr: Acc depr
then do elimiation of depreciation
DR: Acc depr
CR: Depreciation expense
With what percent of ownership comes the use of the equity method
20 to 50 %
Where does Trading security end up on classification on BS? and marked at what value
Current Asset generally, at Fair Value
Where does AFS security end up on classification on BS? and marked at what cost
Current or noncurrent asset, at fair value
Where do the unrealized gain or loss go on an AFS if it is sold? if it is still being held?
realized G/L on IS if sold, if not sold it goes to equity (U in PUFIER)
How do you record an unrealized gain or loss on a trading security
Dr: Unrealized loss on trading security
Cr: Valuation Account (fair value adjustment)
To NI
How do you record an unrealized gain or loss of AFS Security
Dr: Unrealized loss on trading security
Cr: Valuation Account (fair value adjustment)
to OCI
How do you calculate the expected credit loss?
PV - Amortized Cost
How do you record a normal nonliquidating dividend
Dr: Cash
Cr: Dividend Income
How do you record a liquidating dividend, meaning the dividends are greater than retained earnings
Dr: Cash
Cr: Dividend Income
Cr: Investment in Corp
Unrealized Gains and losses on equity securities are included where
in earnings on the IS as they occur
What method is used on reporting if you own 20% or less,
Fair Value
What method of reporting do you use if you own LESS than 20% BUT you have significant influence??
you ue the Equity Method
When using the equity method, and the investee reports income and dividends paid out in cash, what is the impact on the amount of your investment
if you receive cash dividends, it reduces the amount of your investment
if you are recognizing investee’s portion of net income, it increases the amount of your investment
For the equity method, what is the difference between the purchase price of investment and the fair value? what is the difference between the Fair value of the investment and the Net Book Value?
The difference between the purchase price and FV is GOODWILL
The difference between the purchase price and NBV is the premium paid on the investment
When doing the CAR part of the conosoldated elimination entry, what are the CAR formulas?
Assets - Liabilities = CAR
or just net assets = car
how is ending NCI determined after the acquisition date?
Beginning NCI
+NCI share of NI
-NCI share of dividends
=ending NCI
Uner IFRS how is goodwill impairment testing done at the Cash Generating Unit Level?
impairment is recognized when the carrying value is greater than the recoverable amount. This impairment loss is first allocated to goodwill, and then distributed across other assets
