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COMM 450 (3)
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Notes (Complex Financial Instruments).docx

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Department
Commerce
Course
COMM 450
Professor
Brian Parker
Semester
Winter

Description
IntermediateAccountingSubjectComplexFinancialInstrumentsChapter16ChapterscopenotesExcludeappendicesABCExpandeddiscussionondebtwithattachedwarrantsExcludeinducedearlyconversionsp1016ExpandeddiscussionondebtwithissuersharesettlementoptionatmaturityExcludecertaincompensatorystockoptionplansDerivativesAsthenamesuggeststhiscategorythereareseveraltypesofinstrumentshavetheirvaluederivedfromthevaluechangesinsomethingelseorabasketofsomethingelsesTheytransferrisksthatareinherentintheunderlyingprimaryinstrumentwithoutanypartyhavingtoholdanyinvestmentintheunderlyingTheobjectiveofcompaniesenteringintoderivativesistomanageoneormoretypesofrisksandwhilethereportingstandardsareuniformtheirapplicationvariesFinancialInstrumentsrelatedstandardsunderPEIFRSDerivativePrimaryInstrumentwhosevalueisbasedonunderlyingsAlreadydiscussedoTheirvaluechangesinresponsetotheunderlyinginstrumentsAccountsReceivableoTheyrequirelittleornoinitialinvestmentAccountsPayableoTheyaresettledatafuturedateBondsEquityholdingsMeasurementandpresentationquitestraightforwardBKP10th Pageof 129InstructorIntermediateAccountingSubjectComplexFinancialInstrumentsChapter16Managingrisks1CreditriskonepartytoafinancialinstrumentwillcausefinanciallosstoanotherpartyHowtomitigate2LiquidityriskentitywillnotbeabletomeetitsfinancialobligationsHowtomitigate3MarketriskfinancialexposureduetouncontrollablemarketforcesHowtomitigateaCurrencyriskexposedpositionsforbalancesreceivablespayablesornetequityinforeignsubsidiariesthataredenominatedinforeigncurrenciesbFairvalueorcashflowexposurearisingfromchangesinmarketinterestratescOtherpriceriskspecificorgeneralmarketrelatedeventsthatcouldaffectfairvalueorcashflowsTheprocessofputtinginplaceaderivativeforthepurposesofmitigatinganidentifiedriskiscalledhedgingHedgeaccountingisnotcoveredinthiscoursebutitisessentialtounderstandthefinancialreportingobjectiveandgeneraldisclosurerequirementsFuturemarketpriceEnterintoaforwardEnterintoaforwardincreasesCommodityCommoditycontracttobuyataDecreasescontracttosellatasellersriskpricepurchasersrisksetpriceinfuturesetpriceinfutureWinnerdroppriceincreaseLoserDontgambleonoutcomemitigateriskonlyCanmanagebusinesswiththiscertaintythisiskeyCanmanagebusinesswiththiscertaintythisiskey229InstructorBKP10th Pageof
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