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Flashcards in STAY Focused II Deck (20)
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1
Q

WHERE are Unrealized gains and losses on trading securities recognized?

A

In “Net Income” in the period of the change

2
Q

HOW are Investments in Available-for-Sale securities reported?

A

AT market value with increases or decreases reported in Other Comprehensive Income (OCI)

NOTE: OCI is reported on the Balance Sheet

3
Q

HOW are Available-for-Sale Marketable Securities classified (reported)?

A

AT their fair market values with the difference between FMV and Cost reported in a valuation account

4
Q

WHEN is a Gain or Loss “Realized?”

A

WHEN an asset is disposed of

Note: A change in fair value, however, results in an unrealized gain or loss

5
Q

WHERE are Unrealized Gains and Losses on Trading Securities reported?

A

In “Income” on the Income Statement (I/S)

6
Q

WHERE are Unrealized Gains and Losses on Available-for-Sale securities reported?

A

In “Other Comprehensive Income”

i.e. This is a Balance Sheet account

7
Q

WHAT happens when an investment in a debt security is reclassified from available for sale (AFS) to held to maturity (HTM)?

A

THE transfer occurs at its market value on the date of transfer

8
Q

WHAT are some financial instruments required by U.S. GAAP to be reported at fair value in the company’s financial statements?

A

Stock options held as an investment

Derivatives

Assets acquired/ Liabilities assumed

Business combinations reported as acquisitions

Reporting of assets after recognition of an impairment loss

9
Q

HOW are Investments in trading securities reported?

A

AT their fair values as of the balance sheet date

10
Q

HOW are Investments in bonds that will be held to maturity reported?

A

THEY are originally recorded at cost

NOTE: Any discount or premium is amortized adjusting the carrying value of the bonds to the amortized cost

11
Q

WHAT type of Marketable Security is a marketable equity security that an entity “does not intend to sell in the near term?”

A

THIS is an Available-For-Sale security

And it is reported as an separate component of “Other Comprehensive Income”

On the Balance Sheet (B/S)

12
Q

HOW are unrealized gains or losses recognized for an Available-For-Sale Marketable security?

A

BY increasing or decreasing the carrying value of the investment, respectively, with the use of a valuation allowance account

AND

Recognizing the corresponding amount in “Other Comprehensive Income”

13
Q

HOW are available-for-sale securities that experience a loss that are considered “other than temporary” (permanent) treated?

A

IT must be written down to a new cost basis and is treated as a “realized loss”

14
Q

Are Leases allowed to use the Fair Value Option?

A

NO.

ASC 825-10-15-5(d) excludes leases from eligibility for the fair value option

15
Q

WHAT are the qualifications for an item to qualify for recognition in the financial statements of a company under GAAP?

A

IT MUST:

(1) Be measurable with reasonable reliability
(2) Be relevant to users
(3) Be based on information that is representationally faithful, verifiable, and neutral

16
Q

A Fair Value Hedge is…….?

A

A hedge designed to:

  • mitigate or eliminate a risk associated with an exposure to changes in the fair value of a recognized asset or liability or firm commitment
17
Q

WHAT would be considered a “Perfect Hedge?”

A

NO possibility of Gain or Loss

NOTE: A perfect hedge is one that eliminates the risk entirely which protects an entity from losses associated with the risk but also prevents it from benefiting from gains

18
Q

WHERE are the Gains or Losses for a Fair Value Hedge recognized?

A

In “Current Earnings” in each reporting period

19
Q

WHAT is the Intrinsic Value of a Stock?

A

THE “market price” less the “strike price”

20
Q

HOW are cash flow hedges and hedges of net investments in foreign operations accounted for under IFRS?

A

By Recognizing Gains and Losses in “Other Comprehensive Income”