Miscellaneous Category III Flashcards
Servicing Assets and Liabilities : What are they and when are the recognized?
Servicing Assets (total servicing revenue is expected to exceed total servicing costs)
Servicing Liabilities (total servicing costs are expected to exceed total servicing revenues)
When an entity undertakes an obligation to service financial assets or liabilities, the obligation is recognized (as an asset or liability)
Initial Recognition of Asset Retirement Obligation
An entity should recognize the fair value of an asset retirement obligation in the period in which it is incurred if a reasonable estimate of fair value can be made.
Otherwise, the liability should be recognized in the first period in which a reasonable estimate of fair value can be made.
What is the fair value of a liability for an asset retirement obligation?
The fair value of a liability for an asset retirement obligation is the amount at which that liability could be settled in a current transaction between willing parties. If quoted market prices are not available, the best estimate of fair value should be used.
How should an entity consider after the initial recognition of Asset Retirement Obligation?
After the initial measurement, an entity should recognize period-to-period changes in the liability for an asset retirement obligation resulting from (a) the passage of time and (b) revisions to either the timing or the amount of the original estimate of undiscounted cash flows.
How should an entity measure changes in the asset retirement obligation due to the passage of time?
By applying the interest method based on an interest rate equal to the credit-adjusted, risk-free rate that existed when the liability was initially measured. That amount should be recognized as accretion expense on the income statement.
What should an entity recognize at the time of settlement of an Asset Retirement Obligation?
On settlement of the asset retirement obligation, an entity recognizes a gain or loss for the difference between the settlement amount and the carrying amount of the asset retirement obligation at the date of settlement (not the initial obligation amount).
When there is a transfer of assets but it cannot be considered a sale because control is not surrendered, what is this called?
Secured Borrowing
