Acc 356 3

Front 1

5 measurement attributes

Back 1

historical cost
net realizable value
current or replacement cost
market value
present (discounted) values

Front 2

2 types of subsequent measurements

Back 2

allocation or passage of time (prepaid assets, deferred revenue, depreciation, interest)
changes in price; fresh start measurements or remeasurements

Front 3

future value

Back 3

the sum to which an amount will increase as the result of compound interest

Front 4

compounding

Back 4

interest is earned on principal & interest earned to date

Front 5

simple interest

Back 5

interest is earned only on the original investment

Front 6

present value

Back 6

the current value of an amount to be received in the future
discounting

Front 7

annuities

Back 7

a series of equal payments/withdrawals that accumulate over time that each earn interest

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ordinary annuity

Back 8

end of period deposit/withdrawal

Front 9

annuity due

Back 9

beginning of period deposit/withdrawal
will always have higher future value because will always have one more period of compounding

Front 10

interest formula

Back 10

principal * rate * time

Front 11

financial asset

Back 11

cash or a contract that gives a right to receive cash

Front 12

financial liability

Back 12

a contract that obligates a firm to pay cash

Front 13

zero coupon bond

Back 13

pay a single lump sum in the future

Front 14

installment loan

Back 14

make level payments over a period of time

Front 15

coupon bond

Back 15

make level payments over a period of time and then pay a final single amount

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cash exchange price

Back 16

fair or market value of the bond or loan

Front 17

if no cash exchange price...

Back 17

use present value of future cash flows, discounted at market rate of interest

Front 18

stated rate of interest

Back 18

used to determine the amount of the contractual interest payments

Front 19

market rate of interest

Back 19

used to value the contractual interest payments (because of fair value objective)

Front 20

real interest rate

Back 20

lender/investor wants compensation for deferring payment

Front 21

inflation expectations

Back 21

lender/investor wants higher rate if future cash flows will have lower purchasing power

Front 22

risk premium

Back 22

lender/investor wants higher rate if stream of future cash flows is riskier

Front 23

effective interest method

Back 23

record interest expense/revenue using the market rate at inception (called the effective rate)

book value at beginning of period * effective rate = interest revenue/expense for period

Front 24

holding gains and losses
historical

Back 24

ignore changes in market rate and value
use old rate to determine interest revenue and value
recognize income impact of the change in cash flow when realized
loss/gain equals remaining book value at maturity

Front 25

holding gains and losses
full fair value

Back 25

current new market rate used to revalue asset and calculate interest

Front 26

holding gains and losses
mark to market

Back 26

current market rate used to revalue asset
historical rate used to calculate interest

Front 27

fair value

Back 27

the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between marketplace participants at the measurement date

price in hypothetical transaction
exit price
not adjusted for transaction costs

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market participants

Back 28

buyers and sellers in the principal (or most advantageous) market that are:
independent
knowledgeable
legally and financially able to transact
willing to transact, but not compelled to do so

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exit market

Back 29

represents the market in which the reporting entity would sell the asset or transfer the liability

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principal market

Back 30

the market in which the reporting entity would sell the asset or transfer the liability with the greatest volume and level of activity for the asset or liability

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most advantageous market

Back 31

the market in which the reporting entity would sell the asset or transfer the liability with the price that maximizes the amount received for the asset or minimizes amount paid to transfer the liability considering transaction costs

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in-use

Back 32

estimates fair value if used in combination with other assets as a group

Front 33

in-exchange

Back 33

estimates fair value of a separable asset on a stand-alone basis

Front 34

market approach

Back 34

estimates fair value from information generated by market transaction prices for identical or comparable items

Front 35

income approach

Back 35

estimates fair value through discounted cash flows based on marketplace expectations (market interest rate)

Front 36

cost approach

Back 36

estimates fair value through the cost to replace the service capacity, adjusted for obsolescence

Front 37

level 1 inputs

Back 37

based on quoted prices for identical items in active markets

Front 38

level 2 inputs

Back 38

based on inputs other than quoted prices in level 1 that are observable either directly or indirectly with market data

Front 39

level 3 inputs

Back 39

unobservable inputs that reflect the entity's own assumptions about the assumptions of market participants

Front 40

active market

Back 40

transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis

Front 41

market type examples

Back 41

exchange markets
dealer markets
brokered markets
principal-to-principal markets

Front 42

recurring disclosure measurements

Back 42

end of period fair value
categorized by hierarchy level
total gain/loss in period related to each category
reconciliation of the beginning and ending balances for level 3 measurements
method of measuring fair value

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non-recurring disclosure measurements

Back 43

no reconciliation
describe reason for remeasurement

Front 44

components of present value measurement

Back 44

estimate of a future cash flow or series of future cash flows
expectations about possible variations in the amount or timing of cash flows
time value of money
market price of risk inherent in the cash flows
other factors

Front 45

traditional approach

Back 45

use the most likely cash flows (usually contracted amounts) with appropriately risk-adjusted rate

Front 46

expected present value approach

Back 46

use expected cash flows (probability weighted average) with appropriately risk-adjusted rate
non-contracted cash flows

Front 47

held-to-maturity securities
definition

Back 47

debt securities that the enterprise has the positive intent and ability to hold to maturity (cannot be held indefinitely)

Front 48

held-to-maturity securities
accounting

Back 48

report at amortized cost (historical cost +/- premium or discount)
interest revenue reported on the income statement (use historical market rate)
realized gains and losses reported on the income statement

Front 49

trading securities
definition

Back 49

debt or equity securities bought and held primarily for sale in the near term to generate income on short-term price differences
active and frequent buying and selling

Front 50

trading securities
accounting

Back 50

report at fair value with holding gains and losses reported in net income
interest and dividend revenue reported on the income statement
interest income is calculated using historical market rate

Front 51

available for sale securities
definition

Back 51

debt or equity securities not classified as held to maturity or trading securities

Front 52

available for sale securities
accounting

Back 52

report at fair value with holding gains and losses reported in OCI
interest and dividend revenue reported on the income statement
interest income is calculated using historical market rate (not full fair value)
realized gains and losses reported on the income statement (reclassify unrealized gains/losses as realized when sold)

Front 53

comprehensive income

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a change in equity during a period from transactions and events from non-owner sources

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asset group

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lowest level for which identifiable cash flows exist that are independent of other assets (or asset groups)
if an asset does not have identifiable, independent cash flows, asset group shall include all assets and liabilities of the entity

Front 55

what triggers an impairment test?

Back 55

negative changes: decreases in market value; adverse change in use or physical condition; adverse change in legal, business, or regulatory climate
negative performance: total acquisition costs in excess of original expectation; a history of operating losses
plan to sell/dispose early: more likely than not that asset will be disposed of significantly earlier than previous estimate of useful life

Front 56

2 step impairment test

Back 56

compare estimated undiscounted net cash flows expected from use and disposition of the asset to the carrying value
if the carrying amount is greater, recognize the impairment by writing the carrying value down to fair value or discounted cash flows if no market value

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accounting for asset groups

Back 57

impairment only reduces CV of long-lived assets
pro rate the loss using the relative carrying amounts of those assets, but no asset shall be reduced below its individual fair value

CV of asset/Total CV of group * total loss

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disclosures for loss on impairment

Back 58

included in income from continuing operations

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supplemental disclosures for loss on impairment

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description of impaired assets and circumstances leading to impairment
amount of impairment loss and how loss was determined
where loss is located in income statement
segment affected if applicable

Front 60

IFRS revaluation model

Back 60

PP&E is marked to fair value periodically
fair value should be based first upon appraisals, then comparable sales, then estimated using cash flows or replacement cost
holding gains recorded in OCI
holding losses recorded in NI
exception if gain or loss is reversal

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IFRS cost model

Back 61

similar triggers to US GAAP
calculate recoverable amount
recoverable amount = higher of fair value less selling costs or discounted future cash flows from continued use
if recoverable amount < carrying value, record impairment equal to carrying value - recoverable amount
impairment losses can be reversed if supported by evidence only up to amount of loss recognized