🏷️ LIMITED TIME OFFER: GET 20% OFF GRADE+ YEARLY SUBSCRIPTION →
Log in
HomeClass Notes1,200,000CA670,000

ACTG 3110 Lecture Notes - Lecture 10: Effective Interest Rate, Financial Instrument, Equity Method

60 views6 pages
ceruleanduck709
16 May 2016
School
York University
Department
Accounting
Course
ACTG 3110
Professor
Elizabeth Farrell

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

This will allow to predict impairment in the future as well. Right now under ifrs, impairment is measured depending on how a financial instrument is classified. Under the new model, measurement of impairment will be the same regardless of the type of instrument and its classification. First: portion of expected credit losses is recognized. Second: interest revenue is calculated depends on whether an asset is considered to be credit impaired - you used ac amount of the asset which applied the effective interest rate. Liabilities still ac but need to value at fv. Must disclose to assist investors and analysts to understand the amount of credit losses, the basis for their measurement and the reasons for changes in expected credit loss over time, key assumptions used to predict credit losses. This improvement is based on better predicting expected credit losses. Consolidations: no more acg-15 headaches for private enterprises.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related Documents

ACTG 3110
Final Exam
Study Guide
ACTG 3110 Final: FInal Post-Midterm Articles
turquoiseplatypus626
ACTG 3110 Lecture Notes - Lecture 11: Transaction Cost, Credit Risk
yellowskunk879
ACTG 3110 Lecture 1: ACTG 3110 MIDTERM
purplefish449

Related Questions

For each of the items below, determine which is US GAAP guidance and which is IFRS guidance. In some instances, the answer is both US GAAP and IFRS, or neither.

Standard

US GAAP

IFRS

A.

Allows FVO

Does not allow FVO

B.

Allows recognition of day-one gains and losses

Does not allow recognition of day-one gains and losses

C.

Defines fair value as the transaction price

Defines fair value as the exit price

D.

Requires transfer of effective control (including establishing legal isolation, transfer of the right to pledge the assets, and no repurchase obligation) for derecognition of a transferred asset

Requires transfer of risks and rewards of ownership and a control test to determine whether the transferor retains control over the assets transferred

E.

Requires that financial instruments be sorted into specific categories for classification and measurement purposes

Does not require financial instruments to be sorted into specific categories for classification and measurement purposes

F.

Requires recognition of foreign exchange gains and losses in Net Income for AFS instruments with foreign exchange components

Require recognition of foreign exchange gains and losses in OCI for AFS instruments with foreign exchange components

Read the 2015 annual report of Air France – KLM and answer the 20 questions asked regarding the accounting issues. Link is provided below:

http://www.airfranceklm.com/sites/default/files/publications/afkl_registration_doc_2015.pdf

1. Air France-KLM reports ‘Consolidated statement of recognized income and expenses’ for the year ended December 31, 2015. If this statement was a U.S. GAAP statement, what would be the title of this statement?

a. Consolidated statement of total net income

b. Consolidated statement of other comprehensive income

c. Consolidated statement of comprehensive income

d. Consolidated statement of recognized net income

2. What method does Air France-KLM use for the Statement of Cash Flows?

a. Indirect method

b. Direct method

c. Gross method

d. Net method

3. The basic and diluted earnings per share for the year ended December 31, 2015, indicates that Air France-KLM has:

a. no convertible debts.

b. some dilutive securities.

c. no preferred stocks.

d. some treasury stocks.

4. What method is used to account for investments in companies over which Air France-KLM can ‘exercise significant influence on financial and operating policy decisions?’

a. Cost method

b. Liability method

c. Equity method

d. Fair value method

5. Sale of passenger tickets is accounted for at the time of ticket sale as:

a. Sales revenue

b. Deferred revenue

c. Contingent asset

d. No recognition

6. How does Air France account for business combination costs other than those related to the issuance of debt or equity securities?

a. Expensed as incurred

b. Capitalized as incurred

c. Included in goodwill

d. Used to offset fair value of the acquisition

7. Which of the following is not an ‘accumulated other comprehensive income’ item among those reported in the ‘reserves and retained earnings’ in the 2015 consolidated balance sheet of Air France-KLM?

a. Available for sale securities reserves.

b. Derivatives reserves.

c. Legal reserves.

d. Pension defined benefits reserves.

8. What is the carrying amount of investments in debt and equity securities that are classified as available-for-sale?

a. Fair value Cost

b. Amortized cost

c. Lower of cost or market

9. Inventories are carried at:

a. The lower of the first-in-first-out cost or net realizable value.

b. The first-in-first-out cost.

c. The lower of the weighted-average cost or net realizable value.

d. The weighted-average cost.

10. Air France-KLM classifies its frequent flyer programs as:

a. Noncurrent liability

b. Current liability

c. Current asset

d. Other debt

11. The followings are included in Air France-KLM’s intangible assets, except for:

a. Trademarks

b. Leased aircraft

c. Customer relationships

d. Slots for takeoff and landing

12. Air France-KLM reports bank overdrafts as:

a. A contra account to cash and cash equivalents.

b. A current liability.

c. An expense.

d. A bank deposits in transit.

13. Which method does Air France-KLM use to record depreciation expense for its flight equipment?

a. The activity-based method.

b. The sum-of-years’-digit method.

c. The straight-line method.

d. The group method.

14. Which accounting standards does Air France-KLM use?

a. U.S. GAAP

b. French GAAP

c. Netherlands GAAP

d. International Financial Reporting Standards

15. As of December 31, 2015, what assets are held for sale?

a. Land

b. Aircraft

c. Equipment

d. Buildings

16. Which of the following is included in ‘income from operating activities’ but not in ‘income from current operations?

a. Sale of aircraft equipment

b. Research and development costs

c. Bad debt expense

d. Interest revenue

17. Which of the following is not true about accounting treatment for the overhaul cost of major airframe and engine?

a. The cost is treated as separate asset component.

b. The cost is capitalized.

c. The cost is depreciated over the remaining useful life.

d. The cost is expensed as incurred.

18. How are financial assets accounted for if the Air France-KLM intends to sell them in the near future to realize capital gains?

a. At fair value with fair value changes recognized in the current period profit and loss

b. At fair value with fair value changes recognized as other comprehensive income

c. At cost with no recognition of fair value changes

d. At amortized cost with no recognition of fair value changes

19. Which of the following is not true about impairment test?

a. Tangible fixed assets, intangible assets, goodwill, and other assets with indefinite useful life are subject to an impairment test.

b. The impairment test is done at least once a year.

c. Recoverable value is the lower of the net realizable value and value in use.

d. The value in use is determined according to the discounted future cash flow method.

20. Which of the following is not an ‘other non-current income and expenses’ item?

a. Restructuring costs

b. Gains and losses on disposal of shares available for sale

c. Gains and losses on disposal of subsidiaries and affiliates

d. Gains and losses on sale of trading securities

1.Pension benefits represent deferredcompensation for current service.

A) True
B) False

2.Pension costs are recognized on an accrualbasis over the years employees earn pension benefits.

A) True
B) False

3.Almost all new pension plans pay definedbenefits.

A) True
B) False

4.Defined contribution plans require employersto make fixed payments to but not from a pension fund.

A) True
B) False

5.Defined contribution retirement benefits paidto retired employees dependend on how well the pension planactaully performs.

A) True
B) False

6.In chapter 17, our text's authors seem tosuggest that actual results rarely differ from actuarialestimates.

A) True
B) False

7.US GAAP requires that corporations reportboth pension plan assets and liabilities on their balancesheets.

A) True
B) False

8.Our text indicates that actuarial estimatesof projected benefits may be more reliable than actuartialestimates of accumulated benefits.

A) True
B) False

9. In Illustraton 17-6A on page 1005,retirement benefits have been discounted at 6%.

A) True
B) False

10

Retroactive changes to the way pension benefits are determeinedcan result in prior service costs.

A) True
B) False

11.

When calculating the present value of retirement benefits, lowerdiscount rates reduce PBO estimates.

A) True
B) False

12.

Retriement benefits paid to employees always reduce projectedbenefit obligations.

A) True
B) False

13. In chapter 17, our authors suggest thattoday, it's very unusual for pension plans to be underfunded.

A) True
B) False

14. A company's PBO is reported as a separatelibilitiy on its balance sheet.

A) True
B) False

15. Pension expense calculatons are made usingexpected returns on plan assets.

A) True
B) False

16. Prior service costs are amortized overtime, not immediately expensed when incurred.

A) True
B) False

17. Gains or losses arise whenever the PBO orreturn on plan assets turn out to be different than expected.

A) True
B) False

18. Amortizing net gains would will makepension expense calculations grow larger.

A) True
B) False

19. Amortized gains and losses are reclassifiedfrom OIC to net income.

A) True
B) False

20. Service and interest costs increase PBOcalculation.

A) True
B) False

21. Under International Financial ReportingStandards (IFRS) OCI gains and losses are not amortized butaccumulate.

A) True
B) False

22. Given an actual return on plan assets of$30 and a gain on plan assets of $3, expected return on plan assetswould be $27.

A) True
B) False

23. Given a beginning PBO of $400 and adiscount rate of 6%, interest cost would be $24.

A) True
B) False

24. Analysis of exercise 17-8 on page 1043indicates Sterling Properties earned a $9,000 gain on plan assetsin 2016.

A) True
B) False

25. The actual return on plan assets Abbot andAbbot earned in exercise 17-10 was less than their expectedreturn.

A) True
B) False

26. Fahy Transportation's pension expense wouldinclude an interest cost of $51.1 million in exercise 17-7.

A) True
B) False

27. In CPA Exam Question 1 on page 1050, WolfInc. would report a net pension liability of $85,000 on its balancesheet.

A) True
B) False

28. The correct answer to CPA Exam Question 8on page 1051 is letter c.

A) True
B) False

29. Analysis of Judgment Case 17-3 on page 1061indicates LDG Consulting's pension is overfunded by $405,000 at theend of 2016.

A) True
B) False

30. After studying chapter 17, it would bereasonable to conclude athat GM would account for its pension planamendment in Real World Case 17-9 on page 1063 as a prior servicecost.

A) True
B) False0