Ninja Notes: Consolidation, Derivatives, Hedging, & Foreign Currency Translation Flashcards
What method is used when 20% or less Ownership exists?
Fair Value method.
What method is used when 21-50% Ownership exists?
Equity method.
What happens when dividends are received from the investee under the equity method?
Divs. received reduce the Investment account and are not income.
When is Consolidation needed?
When 50% or more Ownership exists?
How are assets and liabs. recorded on the Acquisition Date under consolidation?
At fair value.
What happens to acquired shares under consolidation that were previously accounted for under the FV or Equity method?
They are revalued to Fair Value and this results in a gain or loss in the current period.
How are acquisition costs handled?
They are expensed in the current period, not capitalized.
How are Stock registration and issuance costs handled?
They are Netted against Stock proceeds.
DTA?
Deduction will reduce future income taxes expenses.
DTA?
Income will be taxable in a future period and will increase future tax expense.
Current Deferred tax assets and liabs. will?
Impact income tax expense within 12 months.
How are Derivatives recorded when acquired and valued afterwards?
They are recorded at cost when acquired and revalued at Fair value each period on the B/S.
What are Fair value hedges?
They offset exposure to changes in the value of a recognized asset/liab. or of an unrecognized commitment.
How are Fair value hedges initially recorded and how are gains and losses handled?
Recorded on the B/S at Fair value. Gains and losses go to the I/S.
What are Cash flow hedges?
Hedges of exposure to fluctuations in cash flows?
