Flashcards in Deck 26 Deck (21):
Contingencies losses will only be accrued when the loss is:
Estimable and "probable"; if "possible" then disclose
4 types of derivatives (OFFS)
Options, futures, forwards, swaps
Disclosure of market risk vs. credit risk:
Credit risk: required; Market risk: required only for IFRS
Three necessary characteristics for a derivative:
1) one or more underlyings and notional amounts; 2) no initial net investment; 3) requires or permits a net settlement
Underlying vs. notional amount
Underlying: specified price or rate; Notional: Specified unit of measure used to calculate gain/loss
Put vs. call option
Call option: gives the holder the right to buy; Put: gives the holder the right to sell
Fair value vs cash flow hedge:
Fair value: Firm commitment, income statement; cash Flow: forecasted transaction, OCI
Difference between ineffective and effective portion of cash flow hedge:
Ineffective: income statement; Effective: OCI
Do you recognize the conversion feature for convertible bonds? (GAAP vs. IFRS)
Gaap: No; IFRS: Yes
When is the liquidation basis of accounting used?
When liquidation is imminent; applied prospectively
Holding gain on inventory =
Replacement cost - original purchase price
Definition of a bargain purchase
FV of net assets acquired is more than the consideration exchanged for the net assets
What method should be used to account for an investment that is non-voting?
Last amount of inventory purchased is the first to be sold
First amount of inventory purchased is the first to be sold
Conversion of bonds into common stock - Journal entry
Dr. Bonds payable; Cr. Unamortized discount, common stock, and APIC
Restricted funds for principal and interest payments should be accounted for in what fund?
Debt service fund
What is the initial net investment for a forward contract?
Financial statement requirements for GAAP and IFRS?
IFRS: 3 B/S and 2 for all other statements; GAAP: 2 B/S and 3 for all other statements
Potentially dilutive securities include:
Convertible securities, warrants, contracts settled in cash or stock, and contingent shares