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FAR My Flashcards > Marketable Securities and Business Combinations > Flashcards

Marketable Securities and Business Combinations Flashcards

1
Q

Classification of Securities

A

Trading Security, Available for sale securities, Held to Maturity

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2
Q

Under IFRS Marketable security investment can be classified

A

Financial assets at fair value through profit or loss
Available for sale
Held to maturity

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3
Q

Treatments

A

Trading securities wil go to IS and AFS will got o OCI

HTM securities are valued at amortized cost.

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4
Q

Reclassifications

A

From Trading Catogery: The unrealized holding gain or loss at the date of transfer is already recognized in earnings and shall not be reversed
To trading category: The unrealized holding gain or loss at the date of transfer shall be recognized in earnings immediately.
Debt security classified as held to maturity transferred to available for sale: The unrealized holding gain or loss at the date of transfer shall be reported in other comprehensive income.
Debt Security Classified as Available for sale Transferred to held to maturity

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5
Q

Equity Method

A

JE to record when Purchased: Investment
to cash
Ownership percentage in investee: Investment in Investee
Equity in Earnings
Decrease by Investors parent ownership percentage of cash dividends
Cash
Investment
Dividends not income treated as withdrawals
Income statement
investment
equity in earnings/investee income
Menemonic Base
Beginning balance
Add investors share of investee’s earning
Subtract Investors share of investee dividends
Ending bal
Stock Dividend- Memo entry

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6
Q

Treatment of extra purchase price

A

If you paid extra because of land you don’t amortize

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7
Q

What is the Journal entry for the amortization

A

It is reducing our investment so the entry is Equity in investee income
Investment in investee

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8
Q

Goodwill

A

Don’t test under equity method

NBV-FV

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9
Q

What accounting in used in JV

A

Under US Gaap and IFRS Joint Venture Accounting always recorded at cost

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10
Q

how will you calculate good will

A

Excess of Net bok value to FV is the amount you paid for other assets Excess of FV to purchase price is goodwill

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11
Q

Consolidation

A

Consolidate sub at 100% fair value at acquisition date. Recognition Principle Measurement Principle.

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12
Q

How you calculate Goodwill under Non-controlling interest

A

Fair value of consideration transferred(Cost to the acquirer)
+ Fair value of previously held equity interest in acquire
+ Fair value of non controlling interest_ fair value of net identifiable assets of the acquire

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13
Q

Two consolidation methods

A

Acquisition method-Recognition Principle- The acquirer recognizes all of subsidiaries assets and liabilities, including identifiable intangible assets.
Measurement Principle- Measuring assets at acquisition date fair value

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14
Q

How to calculate beginning retained earnings when they give you end retained earnings

A

BASE=ending retained earnings reverse income recverse dividends

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15
Q

Nuemonic to remember consolidations

A

CAR IN BIG
CAR- Common Stock Retained earnings APIC of subsidiary are eliminated
I-Investment in Subsidairy are eliminated
N-Non-controlling intrest
B-Balance sheet of subsidiary is adjusted to fair value
I-Identifiable Intangible assets
G- Goodwill (or Gain) is required

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16
Q

NCI

A

Everything even NCI is 100% fair value

17
Q

Three types of securities

A

Trading securities,Available for sale, Held to Maturity

18
Q

Trading securities recording rules

A

Current asset
include both debt and secuties
recorded at cost but carried at FMV
Any unrealized gains or lossed appear on Income statement
Realised gains and losses are always with on income statement along with dividend income

19
Q

AFS recoding rules

A

Current or non current
Include both debt and equity
Initially recorded at cost but carried at FMV
Any urealized gains or losses are recorded in B/S as part of Comprehensive income in the stockholders equity section.
In cash flows record under investing activity

20
Q

Temp or perm

A

If it is temp write it up or down if it is perm do not do anything

21
Q

Held to Maturity

A

Only bonds no stocks
Record at cost
Carry at amortized costs
Unrealized gains and losses not applicable
investing activity on statement of cash flows
Considered HTM if sale occurs after 85% of principle has been collected

22
Q

Reclassification Of securities

A

Between trading and AFS
Reclassify at FMV
The difference is treated on the realized loss/gain on income statement
Eliminate any related revaluation accounts

23
Q

Between HTM and AFS

A

Reclassify to FMV
If HTM to AFS then record in OCI
IF AFS to HTM then the unrealized loss is reported on the part of B/S then amortized over the remaining life o the security

24
Q

Fair Value Option

A

When an entity selects fair value option for financial instruments all changes in fair value are recognized in income regardless whatever the security is
classified.
Electing fair vaue option does not have any effect on how securities are classified

25
Q

Fair value Hedge

A

If the firm is hedging against the physical assets or liabilities or a firm purchase commitment the changes in derivatives are reported from income from operations

26
Q

Cash flow hedge

A

If the hedge is for a forecasted future transaction that is expected to take place in the future but not yet a legal commitment then changes in adjustments are reported in stockholders equity in other comprehensive income.

27
Q

The non controlling interest

A

FMV increment

28
Q

Elimaination of intra company transactions

PPand E

A

Cash
acc.dep
equip
gain

Then eliminate the gain
Gain 21 Acc.dep 7
Dep.Exp 7
PPand E 6
Acc.Dep 15

29
Q

Elimiination of intra company transactions-sales

A

Sales
Inv(INventory at cost)
Cogs

30
Q

Eliminate inter company Bonds:

A

BP
Dis
cash
gain or loss

31
Q

AFS Securties in unrealized gain

A

at the end of every year releate to cost and report in B?S

32
Q

Trading securities in unrealized gain

A

Don’t releate to cost but previous year

FAR My Flashcards (38 decks)

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