Term
| What are the two main reasons to analyzing marketable investment securities? |
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Definition
To separate operating performance from investing and financing performance
and to analyze accounting distortions |
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Term
| What are the two types of marketable investment securities? |
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Definition
| debt securities and equity securities |
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Term
| What are examples of the two types of marketable investment securities |
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Definition
debt securities-government or corporate debt obligations.
Equity securities- corporate stock that is readily marketable |
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Term
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Definition
significantly alter the accounting and reporting of investment securities
is no longer the traditional lower of cost or market principle. Acocunting is determined by its classification |
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Term
| SFAS 115 what does the decision depend on? |
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Definition
| the type of security, management intend of owning the security, and the degree of influence over the company |
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Term
| accounting for debt securities |
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Definition
| held to maturity, trading, or available for sale |
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Term
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Definition
| securities acquired with both the intent and ability to hold to maturity. It is an amortized cost on the balance sheet. This is not recognized in either net income or comprehensive income. |
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Term
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Definition
| securities acquired mainly for short-term trading gains. It is point on the balance sheet at fair value and it is recognized in net income |
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Term
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Definition
| securities neither held for trading nor for maturity. it is on the balance sheet at fair value, and not recognized in income but is recognized in comprehensive income |
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Term
| accounting for equity securities |
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Definition
| ownership, purpose, valuation basis, balance sheet, income statement (unrealized gains), income statement (other income effects) |
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Term
| purchase method of accounting (accounting for business combinations) |
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Definition
| companies are required to recognize on their balance sheets the fair market value of the assets acquired with the fair market value of any liabilities assumed. |
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Term
| what steps are taken in consolidation |
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Definition
| aggregation and elimination |
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Term
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Definition
| a company usually records the amount of any contingent consideration payable in accordance with a purchase agreement when the contingency is resolved and the consideration issued or issuable |
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Term
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Definition
| once a company dertermines the total cost of acquired entity it is necessary to allocate this cost to individual assets received; the excess of total cost over the amounts assigned to identifiable tangible and intangible assets acquires, less liabilities assumes, is recorded as goodwill |
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Term
| in process research and development |
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Definition
| some companies are writing off a large portion of an acquistions cots as purchased research and development. pending accounting standard will require capitalization and annual testing for impairment |
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Term
| debt in consolidated financial statements |
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Definition
| liabilities in consolidated financial statements do not operate as lien upon a common pool of assets |
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Term
| gain on subsidiary stock sales |
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Definition
| the equity investment account is increased via subsidiary stock sales. companies can record the gain to income |
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Term
| consequences of accounting for goodwill |
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Definition
| goodwill is not permanent and the pV of super earnings declines as they extend further into the future- future impairment losses are likely |
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Term
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Definition
| a controversial issue is how the acquired company reports assets and liabilities in its separate financial statements |
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Term
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Definition
| are contracts that seek to insulate companies from market risks- securities such as futures, options, swaps |
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Term
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Definition
| are contracts whose value is derived from the value of another asset of economic item such as stock, bond, commodity price, interest rate, or currency exchange rate |
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Term
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Definition
| an agreement between two or more parties to purchase or sell a certain commodity or financial asset at a future date (called settlement date) and at a definite price |
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Term
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Definition
| an agreement between two or more parties to exchange future cash flows. It is common for hedging risks, especially interest rate and foreign currency risks |
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Term
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Definition
| grants a party the right, not the obligation, to execute a transaction. A call option is a right to buy a security (or commodity) at a specific price on or before the settlement date. A put option is an option to sell a security at a specific price on or before the settlement date |
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