BUS 421 Study Guide - Executive Compensation, Historical Cost, Market Participant

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Document Summary

Ideal situation: based on the selling price of an asset in a well working market or the amount the firm has to pay to dispose of a liability. Historical cost = cost dep impairment. Ways to mitigate negative effects of fv: government intervention (investing public money in banking industry, relaxing legal capital constraints, buying excess lt assets, standard setters, certain lt financial assets allowed to be valued at amortized cost. Repurchase agreements (repos): collateral assets to bank as security for a cash loan: then enter into agreement with bank to repurchase the assets shortly after bs date, repaying the loan, normally classified as secured borrowing. Control: when one entity has the power to direct the activities of another in order to generate returns for the controlling entity. Managers attempt to avoid goodwill amortization: pooling of interest accounting: acquisition is formally treated as a merger of equals.

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