Flashcards
FR Flashcards
Cards in this deck (25)
- 1Group Account Steps1. Calculate goodwill
2. Calculate retained earnings
3. Calculate NCI - 2Deferred Tax FormulaCarrying amount - tax base = taxable temporary difference / deductible temporary difference
- 3Deferred tax straight linecost - (cost * tax allowance * years in operation)
- 4Deferred reducing balanceGo through year by year and add up, use same HC given each year
- 5Fair value IFRS 13 definitionPrice that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date
- 6Fair value 3 levelsLevel 1: quoted prices in active markets for identical assets or liabilities
Level 2: quoted prices for similar assets or liabilities in active markets, or inactive markets
Level 3: unobservable inputs such as model assumptions - 7Turner, 2008FVA role of proverbial messenger that is now being shot
- 8Laux and Leuz, 2009Fair values currently most often used for financial assets and liabilities (note they are American, wider range of assets under IFRS)
HC unlikely to be remedy
HC provides hidden reserves, banks can draw upon during recesion - 9Laux and Leuz, 2010Unlikely fair value accounting contributed to the severity of the financial crisis ... by increasing leverage during booms
Claim that FVA exacerbated crisis largely unfounded - 10Shin, 2008FVA and asset write ups allowing banks to increase leverage during booms, which in turn makes the financial system more vulnerable and financial crises more severe
- 11Wyatt, 1994Gains trading: where banks selectively sell financial instruments with unrealized gains and keeping those with losses
- 12Whittington, 2008FVA inappropriate, subjective, and difficult to verify
Conceptual framework: lack of emphasis on stewardship - 13Benston, 2006FVA substantially responsible for Enron's demise, they used level 3 mark to model
- 14IFRS, 2010 objective of FRProvide financial information about reporting entity that is useful to present and potential (equity investors, lenders, and other creditors, primary users) in making decisions about providing resources to the entity
- 15Hines, 1988Rely on accountants to create picture of an organization, or the economy
Goodwill recognized only when company is acquired then it becomes part of the organization
Accountants make the picture
Much more to accounting than simply measuring assets and liabilities
Accountants have hidden power
Organizations will generally get through rough waters as long as no one rocks the boat (going concern assumption, self fulfilling prophecy) - 16Mautz, 1988Washington monument heritage asset, does not meet asset definition as it is more liability than asset outflow rather than inflow of cash
- 17Scott, 2009Accounting policy affects firm value
- 18IFRS 15 5 step process1. Identify contract with customer
2. Identify performance obligation
3. Determine transaction price
4. Allocate transaction price to distinctive performance obligations
5. Recognize revenue after satisfying the performance obligation - 19IFRS 15 core principleentity recognizes revenue to depict transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled for those goods or services
- 20Kiosse and Peasnell, 2009Decline of DB schemes
DC plans less generous than DB schemes
DC undoubtedly cheaper than DB plans
Accrual accounting requirements introductions for past retirement healthcare benefits in US similar to those required for DB pension liabilities appear to motivate firms to curtail healthcare provision - 21Mashruwala, 2007switch of pension assets from equities to bonds (post FRS 17 implementation)
- 22Defined Benefits Planobligations are with employer, amount payable by employer variable, predetermined amount paid in by employee and pension payable
- 23Defined Contribution PlanRisks lie substantially with employee, amount payable depends on fund performance, fixed contributions, level of pension variable
- 24Risks of DB plans for EMPLOYERS1. Longevity risk: employees live longer have to pay more
2. Interest rate risk: interest rates fall and burden of long dated liabilities increase accordingly
3. Inflation risk: risk final salaries increase at a rate greater than predicted
4. Investment return risk: risk returns on employers plan will underperform - 25Risks of DB Plans For EMPLOYEES1. Employment risk: risk employee will lose or change jobs
2. Inflation risk: pension purchasing power eroded by inflation
3. Default risk: moral hazard employer default on obligation
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- marketing Flashcards on FR Flashcards, created by facialhydratingc on 28/05/2015.
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