Needs review Flashcards
List the financial assets and financial liabilities that entities may NOT use fair value to measure and report. (5 of them)
- An investment in a subsidiary or variable interest to be consolidated;
- Employers’ and plans’ obligations for pension benefits, other postretirement benefits, post-employment benefits;
- Financial assets and liabilities under lease accounting;
- Demand deposit liabilities of financial institutions;
- Financial instruments classified by the issuer as a component of shareholders’ equity.
The determination of fair value is based on a ______ transaction and the use of a _____ _____ price.
The determination of fair value is based on a HYPOTHETICAL transaction and the use of a hypothetical EXIT PRICE.
The most advantageous market is the market that __________.
The most advantageous market maximizes the amount that would be received to sell the asset (or minimizes the amount that would be paid to transfer a liability), after taking into account transaction/transportation costs.
True or False: Fair Value is a MARKET based measurement.
TRUE. Fair value is a market based measurement.
Fair value option can be elected ONLY when (3 answers):
- When the item is first recognized
- When an eligible firm commitment occurs
- When accounting treatment of an investment in another entity changes
Alphaco has two subsidiaries, Betaco and Charlieco, both of which are consolidated by Alphaco. Alphaco and Betaco have elected to measure their respective investments held-to-maturity at fair value. Charlieco measures its investments held-to-maturity using amortized cost. In its consolidated financial statements, for which companies, if any, may Alphaco elect to report investment held-to-maturity at fair value?
Alphaco may elect to report ALL of its investment held to maturity at fair value on its consolidated financials even if the subsidiaries do not elect to.
Which of the following statements concerning the determination of fair value at the date an asset is acquired or a liability is assumed is/are correct?
I. The exit price is conceptually different than the entry price.
II. The entry price and the exit price may be different amounts at the date an asset or liability is initially recognized.
BOTH are correct.
When the fair value of an asset is determined as the amount that currently would be required to replace the service capacity of the asset, which valuation technique has been used? (Income, cost, or market approach?)
When fair value is determined as the amount that currently would be required to replace the service capacity of an asset (i.e. current replacement cost) the COST APPROACH has been used.
On January 15, 2008, Able Co. made a significant investment in the debt securities of Baker Co., which it intends to hold until the debt matures. Able’s fiscal year-end is December 31. If Able Co. intends to measure and report its investment in Baker Co. debt securities at fair value as permitted by FASB #159, “The Fair Value Option… “, on which one of the following dates must Able elect to implement the fair value option?
January 15 2008, the date it first recognizes the investment.
In determining the fair value of an asset or liability, would the fair value of the asset or the fair value of the liability be determined using an entry price or an exit price?
Exit price would be used to determine the fair value of both
What are observable inputs?
Inputs derived from market data from sources of that are independent of the reporting entity.
Since 2008, the SEC has permitted foreign private issuers to file their financial statements using:
IFRS as issued by the IASB
Main goal of the SEC
Provide adequate information on which to base investment decisions
Financial Reporting Releases (FRR) and Staff Accounting Bulletins (SAB) are the main pronouncements published by the ______.
SEC (Securities and Exchange Commission)
Regulation S-X governs the content of _____?
S-X governs the form and content of financial statements and financial statement disclosures.
