F4M1 Flashcards
Financial Instruments include
Financial assets and financial liabilities
Contract with favorable terms (asset or liability)
asset
Contract with unfavorable terms (asset or liability)
liability
Fair Value Option for financial instruments
On specified elected dates, entities may choose to measure at fair value. This is irrevocable
Debt securities include
Corporate bonds
REDEEMABLE preferred stock
government securities
Convertible debt
Commercial paper
Types of debt securities
AFS
TS
HTM
Trading Securities
CF from operations
Fair Value
Gain or loss directly to income statement
AFS securities
CF from investing
Measured at fair value
unrealized gain or loss in OCI
realized gain or loss on income statement
HTM securities
CF from investing
Measured at amortized cost
Intent and ability to hold to maurity
CANNOT BE STOCK SINCE STOCK DOES NOT MATURE
Unreadlized gains and losses
TS and AFS only
Valuation account and unrealized gain/loss
Realized gains and losses where are they recognized
income statement
Which debt securities report imapirment
AFS and HTM
Impairment of HTM
current excepted credit loss
PV - amortized cost
Write down to the PVFCF
should be reported at the present value of principal and interest
Credit loss is the difference between present value and amortized cost
Impairment entry to HTM
Credit loss
Allowance for credit loss
Impairment of AFS
change to FMV is gain/loss
loss recognized to the extent of ECL (PV-amortization)
if the loss exceeds ECL, the rest goes to OCI
Sale of TS
selling price - CV is gain or loss
Sale of AFS
Selling price - original cost
Equity securities
PS
CS
Not Redeemable PS
common stock has no significant influence if
less than 20%
Common stock has significant influence if
20-50%
common stock has control if
greater than 50%
Entry from non liquidating equity security
Dr. Cash
Cr. Dividend income
entry from liquidating security
Div > RE
Dr Cash
CR. dividend income (to extent Div does not exceed RE)
CR. Investment
Type of account for investment in investee
Return on Capital
Required disclosures for debt securities
FV/Amortized cost
Realized versus unrealized gains and losses
Impairment charges
Concentration/credit risk
Required disclosures for equity securities
total net g / l
- realized g / l
= unrealized g / l
