...of our Financial Reporting Developments publication on accounting for transfers and servicing of financial assets. This publication has been updated for further clarification and enhancements to our interpretative guidance. Applying ASC 860 in practice continues to be challenging. ASC 860’s scope is wide and applies to more than just securitizations. Moreover, ASC 860 relies in part on legal interpretations to determine the accounting for the transfer. Additionally, a transferor’s continuing involvement — which can vary significantly from transaction to transaction — will also affect the accounting analysis, requiring a complete understanding of both the business purpose and the form of the transaction. The authoritative literature on accounting for transfers of financial assets continues to change. The FASB is currently finalizing a project that would amend the accounting for repurchase-to-maturity transactions and repurchase financings and require new disclosures for certain transfers accounted for as sales and secured borrowings. In addition, the AICPA is updating its guidance on the use of legal interpretations as evidential matter to support management’s assertion that a transfer of financial assets has met the isolation criterion in ASC 860. This publication includes excerpts from and references to the FASB’s Accounting Standards Codification, interpretive guidance and examples. Practice continues to develop and additional authoritative guidance in this area could be issued...
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...transfer provisions preclude sale accounting. Both transfer provisions have the possibility to preclude sales accounting. Transfer provision 1 may allow for UpBeat to retain the benefit by requiring permission to sell the financial assets. It may be inferred by some that because UpBeat cannot unreasonably withhold the sale the benefit transfers to the bank, however, more information is required to properly known exactly what unreasonably withhold means. Transfer provision 2 has the possibility to allow a sale if the fixed price received for the repurchased receivable is a fair value for the price of the receivables at the time of the sale. The following are examples of the application of effective control principles for sale accounting: ASC 860-10-55-31: Judgment is necessary to determine whether a requirement to obtain the transferor’s permission to sell or exchange should preclude sale accounting. For example, in certain loan participation agreements involving...
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...the provision would preclude sales accounting. Alternative 1 — Fail sale accounting criteria because of Transfer Provision 1. ASC 860-10-40-5(b) requires that the bank have the right to pledge or exchange the accounts receivable it received and that no condition both “constrains [the bank] from taking advantage of its right to pledge or exchange [the receivables and] provides more than a trivial benefit” to UpBeat Inc. Transfer Provision 1 (outlined in the case document) indicates that the bank is constrained because it has to obtain permission from UpBeat if it decides to sell or pledge the receivables. This constraint would preclude achievement of the sale criteria under ASC 860-10-40-5(b). Alternative 2 — Fail sale accounting criteria because of Transfer Provision 2. ASC 860-10-40-5(b) requires that the bank have the right to pledge or exchange the accounts receivable it receives and that no condition both constrains the bank “from taking advantage of its right to pledge or exchange [the receivables and] provides more than a trivial benefit” to UpBeat. Because similar accounts receivable are not readily available in the marketplace, the transferee is constrained. The transferee cannot sell the accounts receivable because they would not be available for delivery to the transferor if the transferor were to exercise its call. ASC 860-10-40-5(c) requires as a condition for sale accounting that UpBeat not maintain effective control over the transferred accounts receivable...
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...Research File Memorandum Prepared by: Accounting Student Client: DrugKing. (The Company) Subject: Accounting for financial asset transfers with related call options and put options Background DrugKing transfers financial assets with related call options or put options to a substantive third party, InsureAll. There are three different security categories involved – preferred stock, debt security, and receivables. The DrugKing transfers its investments in the Series A and Series B preferred stock of Tip-Top to InsureAll. The Series A preferred stock is traded publicly (i.e. readily obtainable in the market place) and DrugKing holds a freestanding call option, written by InsureAll, which will allow it to repurchase the asset from InsureAll two years after the transfer date. The Series B preferred stock is not traded publicly (i.e. not readily obtainable in the market place) as the entire series was held by DrugKing prior to the transfer to InsureAll. The DrugKing attaches a call option directly to the Series B stock that will allow it to repurchase the asset from whoever owns it up to two years after the transfer date. Both options have a fixed exercise price. DrugKing also transfers its investment in a debt security to InsureAll. The asset is traded publicly (i.e. readily obtainable in the market place) and DrugKing holds a conditional call attached to the asset that will permit the DrugKing to repurchase the asset if LIBOR ever decreases below 4% (LIBOR was 6.5%...
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...accounts receivables. Three of the company’s cash flow transactions are insurance settlement proceeds, sale of accounts receivable, and acquisition of property, plant, and equipment on account. This memo will analyze each transaction under Financial Account Standards Board’s (FASB) Accounting Standards Codification (ASC) 230, Statement of Cash Flows. This memo will also appropriately classify each transaction and discuss any timing issues related to the Statement of Cash Flows. Insurance Settlement Proceeds Issue What is the proper classification for the statement of cash flows related to insurance proceeds? Analysis A tornado destroyed one of the company’s manufacturing facilities, in turn; Go With the Flow received a $20 million settlement from an insurance carrier in the current year. The company decided not to rebuild the facility, instead, they will use the insurance proceeds to fund a defined-benefit pension plan. According to ASC 230-10-45-12, directly related insurance proceeds on a damaged or destroyed building is an investing activity for the statement of cash flows. These insurance proceeds are not financing activities because according to ASC 230-10-45-14, financing activities come from debt instruments such as notes and bonds, or long and short-term borrowing. Insurance proceeds are the result of a settlement, not issuing debt or borrowing. The...
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...Case 04-8 DrugKing This case study involves determining the effects of call options and put options on the accounting for transfers of financial assets under ASC 860, Transfers and Servicing: Overall (ASC 860) (FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities (Statement 140)). The specific topics, highlighted in the examples below, include (1) attached call options on specific assets and freestanding call options on specific assets readily obtainable elsewhere, (2) conditional call options on transferred assets, and (3) in-the-money put options on transferred assets. Example 1 DrugKing transfers two financial assets, its investments in the Series A and Series B preferred stock of Tip-Top, to InsureAll, a substantive third party (i.e., the transaction does not involve a qualifying special-purpose entity (QSPE)). The Series A and Series B preferred stock are traded publicly (i.e., they are readily obtainable in the marketplace). DrugKing holds a call option, written by InsureAll, on the Series A preferred stock, which will allow it to repurchase the asset from InsureAll two years after the transfer date. DrugKing attaches a call option directly to the Series B preferred stock that will allow it to repurchase the asset from whoever owns the asset up to two years after the transfer date. Both options have a fixed exercise price. Outside counsel for DrugKing concludes that both transfers isolate the transferred assets...
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...FASB Accounting Standards Codification Case This case consists of a series of questions. For each question, your mission is to locate the paragraph in the FASB Accounting Standards Codification (ASC) that answers the question. Please CUT AND PASTE the paragraph from the standards into this document for each question and provide a full reference, including the topic, subtopic, section, and paragraph (e.g. “ASC 605-15-25-1”, or “ASC Master Glossary” for definitions). Submit a hard copy of your answers by Wednesday, October 30th 9:00 am. The FASB Codification database is available at: http://aaahq.org/ascLogin.cfm Student Access Username: AAA51226 Password: KMFpjSW 1. To gain familiarity with the content and organization of the FASB’s Accounting Standard Codification (ASC), use the general topics presented below and determine where the following accounting terms would be located. Topical Categories: Section # General Principles ................................... 100 Presentation .............................................. 200 Assets........................................................... 300 Liabilities...................................................... 400 Equity........................................................... 500 Revenue........................................................ 600 Expenses..................................................... 700 Broad Terms............................................... 800 Industry.................
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...Devry College of NY | Masters of the Universe | Accounting Project Case 11-3 | 12/7/2011 | | Introduction Mergers and Acquisitions are a normal part of the Corporate Finance world. Every week we hear news about large and small corporate mergers and buy-outs. They bring separate companies under the umbrella of a larger company that can be more efficient, created more profits and often offer more products, services and better quality. In this project we look at a joint venture type of merger that brings two companies together in order to form a third company and compete in new market segment. Saturn Inc. and Venus Inc. are two unrelated companies that have decided to form a Joint Venture to form a third company that will be called Jupiter Inc. The new company will be owned 51 percent by Saturn and 49 percent by Venus. At the forming of the Jupiter Inc., Saturn contributed $561 million and Venus contributed four manufacturing facilities and assembled the workforce. Venus’ contribution came with a fair value of $539 Million. Venus was already in the clothing manufacturing business and was looking for an exit strategy because it no longer seemed like a good fit for Venus Inc. Saturn Inc. wanted to expand its manufacturing of children’s clothing. The newly formed company, Jupiter Inc. would satisfy both of the needs by entering into a relatively new industry in making and selling organic clothing to be sold to unrelated retailers. Saturn and Venus...
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...First name Last name Name of Course Name of Professor 12 November 2012 Brief Analysis of Asset-based Financing and Consequent Audit Risk The article by Robert A. Modansky and Jerome P. Massiminom mainly discusses the features and rationale of three asset-based financing methods-revolving lines of credit, purchasing order financing and factoring and further introduces how to account for them according to U.S. GAAP. Companies that are highly-leveraged or do not have the credit rating or track record to qualify for bank financing now find asset-based lending a pleasant choice instead of the financing option of last resort. The main difference between the asset-based lending and traditional types of banking is that asset-based financing is secured by an asset like trade account receivable, inventory or property and equipment not credit rather than credit ratings (Robert A. Modansky, Jerome P. Massiminom).The benefit of placing the borrower’s assets as collateral is that the borrower will receive a higher amount of maximum credit with a lower interest rate. Revolving lines of credit requires the borrower to grant a security interest in its receivables and inventory to lenders as collateral to secure the loan, which creates a borrowing base for the loan. It’s worth noting that not all receivables and inventory are eligible to constitute the borrowing base. For instance, receivables that are more than 90 days old and related party receivables would be ineligible (Robert A...
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...Maria Juarez Professor Muslu Accounting 3367 T-Thurs A. Identify relevant Codification section that addresses transfers of receivables. The relevant codification section for the transfers of receivables is the following: FASB ASC 860-10-05-15. C. Provide definitions for the following: 1) Transfer: The conveyance of a noncash financial asset to someone other than the issuer of that financial asset. The following include transfers: selling a receivable, putting a receivable into securitization trust, and receivable as collateral. 2) Recourse: The right of a transferee of receivables to receive payment from the transferor of those receivables for any of the following: failure of debtors to pay when due, the effects of prepayments and adjustments resulting from defects in eligibility of the transferred receivables. 3) Collateral -Personal or real property in which a security interest has been given. Provide other examples (besides recourse and collateral) that qualify as continuing involvement. • Servicing arrangements • Guarantee arrangements • Agreements to purchase or redeem transferred financial assets • Options written or held • Derivative financial instruments that are entered into contemporaneously with, or in contemplation of, the transfer • Arrangements to provide financial support • Pledges of collateral Jones Co. is in a technology-intensive industry. Recently, one of its competitors introduced...
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...Intermediate Accounting 1 -- Spring 2014 Financial Accounting Standards Codification Research Assignment Questions In order to complete this assignment, you will need to access the Financial Accounting Standards Board (FASB) Financial Accounting Standards Codification database. The related information for this is posted on Blackboard for this course. The UH copy of the FASB Financial Accounting Standards Codification (FASC) can be accessed at: http://aaahq.org/ascLogin.cfm. The FASC is the one and only source of the technical GAAP standards. Other sources are no longer accepted as GAAP. The student log in information is: Username: AAA51654 / Password: xY8Z67e. After you sign in – click on “FASB Accounting Standards Codification” on the screen and the database will open. There is a “search” box in the top right of the screen. If you scroll over the topics (Assets, Liabilities etc.) on the left side of the welcome page you will see the subtopics and contents – click on the subtopic and it will take you to the related Codification content. The class assignment/project that you are responsible for is comprised of researching several of the more current technical topics in accounting and responding to several specific related technical standard questions about the topics. For some of the topics (see below) you will also be asked and responsible for interpreting how the technical standard is applied or what the objective(s) of the related GAAP rules are attempting to address or other...
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...Intermediate Accounting 1 -- Spring 2014 Financial Accounting Standards Codification Research Assignment Questions In order to complete this assignment, you will need to access the Financial Accounting Standards Board (FASB) Financial Accounting Standards Codification database. The related information for this is posted on Blackboard for this course. The UH copy of the FASB Financial Accounting Standards Codification (FASC) can be accessed at: http://aaahq.org/ascLogin.cfm. The FASC is the one and only source of the technical GAAP standards. Other sources are no longer accepted as GAAP. The student log in information is: Username: AAA51654 / Password: xY8Z67e. After you sign in – click on “FASB Accounting Standards Codification” on the screen and the database will open. There is a “search” box in the top right of the screen. If you scroll over the topics (Assets, Liabilities etc.) on the left side of the welcome page you will see the subtopics and contents – click on the subtopic and it will take you to the related Codification content. The class assignment/project that you are responsible for is comprised of researching several of the more current technical topics in accounting and responding to several specific related technical standard questions about the topics. For some of the topics (see below) you will also be asked and responsible for interpreting how the technical standard is applied or what the objective(s) of the related GAAP rules are attempting to address or other...
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...Comparison between U.S. GAAP and International Financial Reporting Standards May 2013 © 2013 Grant Thornton LLP All rights reserved U.S. member firm of Grant Thornton International Ltd Comparison between U.S. GAAP and International Financial Reporting Standards 2 Contents 1. Introduction .................................................................................................................................................. 6 International standards and the IASB ............................................................................................................ 6 Financial accounting and reporting in the United States ................................................................................ 6 IFRS and U.S. GAAP comparison ................................................................................................................. 6 Overall financial statement presentation ................................................................................................... 8 General .......................................................................................................................................................... 8 Statement of financial position / balance sheet .............................................................................................. 9 Statement of comprehensive income / income statement ........................................................................... 12 Statement of changes in equity...
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...Financial reporting developments A comprehensive guide Consolidated and other financial statements Revised November 2013 Noncontrolling interests, combined financial statements, parent company financial statements and consolidating financial statements To our clients and other friends This Financial reporting developments (FRD) publication is primarily designed to help you understand financial reporting issues related to the accounting for noncontrolling interests. This publication also includes interpretive guidance on consolidation procedure and on the presentation of combined, parentonly, and consolidating financial statements. The publication reflects our current understanding of the relevant guidance in these areas, based on our experience with financial statement preparers and related discussions with the FASB and SEC staffs. The accounting for noncontrolling interests is based on the economic entity concept of consolidated financial statements. Under the economic entity concept, all residual economic interest holders in an entity have an equity interest in the consolidated entity, even if the residual interest is relative to only a portion of the entity (that is, a residual interest in a subsidiary). Therefore, a noncontrolling interest is required to be displayed in the consolidated statement of financial position as a separate component of equity. Likewise, the consolidated net income or loss and comprehensive income or loss attributable to both controlling...
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... Cases will be used to permit you to practice the skills you will need as a professional accountant whether in public accounting or private industry. In particular, this course is intended to refine your skills in researching the professional accounting literature to solve particular accounting problems, to arrive at defensible solutions where GAAP is vague or nonexistent, and to present your research conclusions in a professional manner. You will have opportunities to present your work orally and in writing. REQUIRED MATERIALS: A recent Intermediate Accounting text (Kieso used in Acct 315 & 414 would be fine) A recent Advanced Accounting text (whatever was used in for Acct 415-515 would be fine) On-line access to FASB’s ASC (accounting standards codification). The Department has purchase academic license so you can use the $850 “professional” version rather than the free version which has fewer bells and whistles. You can log on from fasb.org but it will take you to http://aaahq.org/ascLogin.cfm where you enter User ID and Password: User ID AAA51700 Password (see your paper version of syllabus) Other Course Materials are provided on the course webpage and you will probably want to print some or all of those files but the cost will just be paper or your UI student print allowance. More pages can be purchased when you run out. See the Help Desk. RECOMMENDED MATERIALS Miller's...
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