|Held to Maturity|| Investment reported at amortized cost - BS|
No unrealized gain or loss
|Trading Securities||Investment reported at fair value (with unrealized holding gains and losses included in net income)|
|Available for sale||investment reported at fair value (with unrealized holding gains and losses excluded from net income and reported in other comprehensive income)|
|Formula to Remember||A=L+OE (+R-E)(+G-L)|
|Significant Influence|| 20%-50%|
Equity Method - investment cost adjusted for subsequent earnings and dividends of the investee
Consolidaiton - the financial statements of the investor and investee are combined as if they are a single company
|Inpairment in Value||For HTM and AFS investments, a company recognizes an OTT impaorment loss in earnings|
|Changing from Equity to Another Method||At the transfer date, the carrying value of the investment under the equity method is regarded as cost|
|Chaning from Another Method to Equity||Change to Equity at the transfer date, the recorded value is the initial cost of the investment adjusted for the investor's equity in the undistributed earnings of the investee since the original investment.|
|Long-Term Debt|| Debenture Bond|
Premium on Bond Payable
Discount on Bond Payable
Zero-Coupon Bonds - Deep Discount no interest paid
Bond with Detachable Warrants - to sweeten deal
|Debt Issue Cost||recorded separately in an asset account and amortized over the term of the related debt usually straight-line|
|IFRS - Debt Issue Cost (transaction cost)|| Cash (Net Amt)|
Bonds Payable (Net Amt)
|Fair Value Option|| *A company has the option to value some or all of its financial assets and liabilities at fair value.|
*If a company chooses the option to report at fair value, then it reports changes in its income statement.
*Can "mix and match"
*Election done at origination
|Lesee|| Operating Lease|
|Lessor|| Operating Lease|
Sales-Type - if manufactured sometimes a clue
|Capital Lease - MUST MEET ONE of FOUR|| *Ownership transfers to the lessee at the end of the lease term|
*A bargain purchase option exists
*The noncancelable lease term is equal to 75% of more of the expected economic life of the asset
*The PV of the minimum lease payment is 90% or more of the fair value of the asset
|Capital Lease - Lessor both criteria|| *The collectibility of the lease payments must be reasonably predictable|
*If any costs to the lessor have yet to be incurred, they are reasonably predictable. Performance by the lessor is substiantially complete.
|Capital Lease - Lessee or Lessor||The amount recorded (capitalized) is the PV of the minimum lease payments. However, the amount recorded cannot exceed the fair value of the leased asset.|
In calculating the PV of the minimum lease payments, the interest rate used by the lessee is the lower of:
*Its incremental borrowing rate, or
*The implicit interest rate used by the lessor
|Capital Lease - Lessee or Lessor|| If the lessor is not a manufacturer or dealer, the fair value of the leased asset typically is the lessor's cost.|
When the lessor is a manufacturer or dealer, the fair value of the property at the inception of the lease is likely to be its normal selling price.
|Depreciation Period|| if contains a transfer of ownership or a bargain-purchase option, depreciate over the economic life|
if does not, depreciate over lease term
|Sales-Type Leases||*A lease in which the lessor is a manufacturer or dealer utilizing the lease to facilitate the sale of goods|
*At inception of the lease, the lessor will record the COGS as well as the Sales Revenue (PV of Payments)
*In addition to interest revenue earned over the lease term, the lessor receives a manufacturer's or dealer's profit on the "sale" of the asset.
|Guaranteed Residual Value||(a) for a lessee, that part of the residual value that is guaranteed by the lessee or by a party related to the lessee (the amount of the guarantee being the maximum amount that could, in any event, become payable); and|
(b) for a lessor, that part of the residual value that is guaranteed by the lessee or by a third party unrelated to the lessor that is financially capable of discharging the obligations under the guarantee.
|Unguaranteed Residual Value||*the lessee is not obligated to make any payments other than the periodic rental payments - recorded as a leased asset and a lease liability - is simply the present value of periodic rental payments.|
|Executory Costs||Responsibilities of ownership that is transferred to the lessee in a capital lease is the responsibility to pay for maintenance, insurance, taxes, and any other costs associated with ownership.|
|Lessor's Initial Direct Costs|| Operating Leases - Capitalize and amortize over the lease term by the lessor.|
Direct Financing Lease - Include as part of investment balance.
Sales-Type Leases - The initial direct costs are expensed at the inception of the lease.
|Sales-Leaseback Arrangements||The owner of an asset sells it and immediately leases it back from the new owner. Any gain on the sale of the asset is deferred and amortized. A real loss on the sale of the property is recognized immediately.|
|Real Estate Leases|| Leases of Land only|
Leases of Land and Building
Leases of Only Part of a Building
|Accounting Income > Taxable Income||Deferred Tax Liability|
|Taxable Income < Accounting Income||Deferred Tax Asset|
|Valuation Allowance|| *A valuation allowance account isneeded if it is more likely than not that some portion of the deferred tax asset will not be realized.|
*The deferred tax asset is then reported at its estimated net relizable value.
|Net Operating Losses|| *To offset earlier taxable income: Operating loss carryback and will result in a tax refund (two years).|
*To offset future taxable income: Operating loss carryforward and will result in a reduction in tax liability (for 20 years)
|Coping with Uncertainty in Income Taxws||Step 1 A tax benefit may be reflected in the financial statements only if it is "more likely than not" that the company will be able to sustain the tax return position, based on its technical merits.|
Step 2 A tax benefit should be measured as the largest amount of benefit that is cumulatively greater than 50 percent likely to be realized.
|Intraperiod Tax Allocation - Income Statement|| Income from continuing operations|
|Intraperiod Tax Allocation - OCI|| Investments|
Postretirement benfit plans
Foreign currency translation