FAR_Section_1.4

Question 1

ASC 820

Answer 1

Does not allow, nore require assets or liabilities be report at fair value unless there is another requirement to do so

Question 2

An entity is required to recognize various items at fair value, including the following:

Answer 2

Investments in marketable debt or equity securities that are classidied as either trading securities or available for sale securities are reported as fair value (market-to-market) as of each balance sheet: unrealized gains and loses on trading securities are recognized in the statement of income; unrealized gains and loses on available for sale securities are recognized in other comprehensive income

Question 3

With very few exceptions, assets aquired and liabilities assumed in a business combination are intially recognized at___

Answer 3

fair value, but are not adjusted to fair value in subsequent periods for presentation on the balance sheet

Question 4

Impairment losses

Answer 4

result in the reduction in the carrying calue of an asset to its fair value in the period of the impairment

Question 5

Impairment recievable are recognized when___

Answer 5

recognized when it is ecpected that some or all payments will either not be received or not received as scheduled

Question 6

Derivatives

Answer 6

reported at fair value; unrealized gains and loses are reported income and designeated as cash flow hedges accumulate in other comprehensive income until recognized at the same time as the gain and loss on the hedges items

Question 7

Items that do not qualify for the fair value election:

Answer 7

pension plan, post retirement, other employment benefits, leases, financial instruments that are components of equity, share based payments and stock options

Question 8

When the fair value option is elected, ___

Answer 8

unrealized gains and losses are reported in income

Question 9

Exit Price

Answer 9

price that would be received to sell the asset or paid to transfer the liability

Question 10

Entry Price

Answer 10

price that would be paid to acquire the asset or received to assume the liability

Question 11

Principal Market

Answer 11

asset or liability would most frequently be traded

Question 12

Most advantageous market

Answer 12

no principal market, values are based on the assumption that a transaction would occur

Question 13

Market approach

Answer 13

invovles using inofmration generated by market transactions that involve identical or comparable assets or liabilities

Question 14

Income approach

Answer 14

involves analyzing future amounts in the form of revenues, cost savings, earnings, or some other item

Question 15

Cost approach

Answer 15

involves measuring the cost that would be incurred to replace the benefit derived from an asset

Question 16

3 levels of inputs - Level I

Answer 16

the most reliable, involves the use of observable data from actual market transactions, occuring in an active market, fo identical assets or liabilities

Question 17

3 levels of inputs - Level II

Answer 17

involves the use of obervable data from actual market transactions but either: transactions did not occur in an active market, or transactions relate to similar, but not identical, assets or liabilities

Question 18

3 levels of inputs - Level II

Answer 18

invovles the use of unobervable data and are largely based on management’s judgement

Question 19

Disclosures

Answer 19

the user of fair value to measure assets and liabilities should provide users of financial statements with better information about the extent to which fair value is used to measure recognized assets and liabilities, the inputs used o develop the measurements, and the effect of certain measurements on earnings (or changes in net assets for the period)

Question 20

Fair Value/exchange price

Answer 20

the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date

Question 21

Some assets are more valuable in____and are measured at what would be received upon slae

Answer 21

exchange

Question 22

Others are more valuable in___and are mreasured at the value represented in the form of same combination of potential revenues earned and costs saved that result from their use.

Answer 22

use

Question 23

Using cash flow info and present value in accounting measurements (SPAC #7)

Answer 23

framework using future cash flows as the basis for accounting measurements at intial recognition of fresh-start measurements and for the interest method of amortization

Question 24

Risk

Answer 24

the probability that the cash will actually be paid or received

Question 25

Timing

Answer 25

the periods in which the payments are expected to be received

Question 26

Interest

Answer 26

the interest rates that would be appropriate taking into consideration market rates and the credit standing of the parties involved

Question 27

Amount of Cash Flows - Traditional Approach

Answer 27

use most likely cash flow amounts; Ex) Cash flow has a 10% chance of being $100, 60% chance of $200, 30% chance of $300?.$200

Question 28

Amount of Cash Flows - Expected Approach

Answer 28

use weighted average of different possibilities; Ex) Cash flow has a 10% chance of being $100, 60% chance of $200, 30% chance of $300?.$220 [(10% * $100) + (60% * $200) + (30% * $300)]