...Discuss whether the following meet the definition of a derivative under ASC 815 Consider the definition of derivative first. Notional Underlying No initial net investment Net Settle 1. A contract to purchase 100 common shares of a publicly traded corporation, at a price of $10 per share on 6/30/2012. No. it is a regular way trade security. 2. A contract to sell EUR 1MM for USD 1.3MM on 6/30/2012 No net settle; 3. A contract that pays the difference between 5% (fixed interest rate) and 6-month USD LIBOR interest rate (as observed in the market on 6/30/2002) on a notional amount of USD 10MM 4. A contract to purchase as many silver bars as needed at $10,000/each to be invoiced and paid quarterly over a one year period. Assume no minimum or maximum purchase requirements, nor the existence of any default provisions. No notional. 5. A contract to exchange the difference between a fixed price of $100/barrel Brent crude and the NYMEX Brent spot price quarterly over the next 3 years on a notional of 25 barrels. Yes. Notional: barrel; Underlying: Brent crude and NYMEX Brent; No initial investment; can be net settled. You have provided the following by your clients who is not sure what the appropriate accounting is. Please provide them your guidance which comports with ASC 815. You should also comment on any provisions that could be changed which will change the ASC 815 classification. A manufacturing company has agreed to terms on a major piece...
Words: 512 - Pages: 3
...ASC 410 Summary ASC 410 is the accounting standard codification that represents asset retirement and environmental obligations. Under ASC 410, there are two main subtopics which are asset retirement obligations and environmental obligations. Asset retirement obligations are legal obligations that may exist in connection with an entity’s retirement of a tangible long-lived asset. These legal obligations may arise when the entity acquires, constructs, or develops a long-lived asset, or operates a long-lived asset under normal conditions. However, it does not occur solely from an entity’s plan to dispose of a long-lived asset. Environmental obligations are environmental remediation liabilities that relate to pollution arising from a prior act, generally as a result of the provisions of laws and regulations. In ASC 410-20, the subtopic is asset retirement obligations. Recognition of a liability for an asset retirement obligation shall occur in the period in which the entity incurs the obligation provided the entity can make a reasonable estimate of the fair value of the obligation. Due to the unique nature of these liabilities, an expected present value technique will usually be the only appropriate technique by which to estimate the fair value of an asset retirement obligation. This method requires a credit-adjusted, risk-free rate to be used to present value the expected cash flows. Adjustments for default risk shall be reflected in the discount rate rather than in the expected...
Words: 555 - Pages: 3
...On September 15, 2009, the Accounting Standards Codification (ASC) became effective causing all previous GAAP literature to become nonauthoritative. The ASC was constructed to simplify and reduce the time required to perform accounting research. It is accessible to subscribers at https//.asc.fasb.org and provides a one stop shop for authoritative GAAP related material. It was many years in the making and made possible by contributions from hundreds of accounting professionals working towards the main goal of streamlining accounting research. Below you will find information about what the Codification is, its goals and purpose, and how affected parties will benefit. Ultimately, after reviewing this information you will gain insight into main topic areas and a better overall understanding of the Codification. First, what is the Accounting Standards Codification (ASC)? The ASC, cited as the FASB Accounting Standards Codification® (Codification), is a subscriber based website which provides useful tools for researching authoritative GAAP related material. It was made authoritative by SFAS 168, The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles. The intent is to make available an up to date research system that makes researching accounting standards easy and efficient. The website database offers a tutorial for researching standards, as well as many additional features such as auto population of related topics to assist with...
Words: 1307 - Pages: 6
...Memo To: Chris Eastus From: Francis Bennett Date: June 22, 2014 Re: Optimization of Production under Bistide Constraint __________________________________________________________________ Recommendation The purpose of this memo is to provide managerial guidance as to the ideal production schedule under current and anticipated Bistide supply. I will make three recommendation for the optimal production level to maximize operating income for: A) Current Bistide levels of 5000 pounds per month; B) Increased supply of 6000 pounds of Bistide per month; C) Increased supply with production constraints. * Scenario A) I recommend producing 200 A1, 200 B2, and 800 C3. * Scenario B), I recommend production increases to: 200 A1, 200 B2, and 1133 C3; and the maximum allowance for the additional resources should be $10,000, or $10.00 per pound. * Scenario C) I recommend producing 250 A1, 200 B2, and 1000 C3; allowing no more than $8,800 for the additional resources, or $8.80 per pound. Scenario A Under Scenario A, minimum production levels for each product are set at 200 units, and the maximum supply of the constrained resource Bistide are 5000 pounds monthly. Producing the most product possible with the highest contribution margin per pound of constrained resource would result in a product mix of 200 A1s, 200 B2s, and 800 C3s. This production schedule will yield an operating income of $16,000 monthly, or $192,000 annually. Scenario...
Words: 542 - Pages: 3
...ASC Financing and Loans Trends and Challenges: Q&A With Anthony Mai of Sun Healthcare Finance By Rob Kurtz April 09, 2010 Anthony Mai is senior vice president of Sun Healthcare Finance, which offers a full financing solutions and related advisory services to companies across the healthcare industry, including ASCs. Q: What are some of the trends you are seeing in the types of projects ASCs are seeking loans for? What types of loans are they receiving? Anthony Mai: I am seeing still a lot of request for start-up financing. I am also seeing request for acquisition financing in which a hospital sells its ASC to a newly formed LLC consisting of the hospital and physicians. The loans that they usually receive are full payout loans with terms ranging from 5-7 percent. Q: What is the critical information ASCs need to present to banks to ensure the best loan possible? AM: If the bank really understands ASCs, the most important piece of information is the physician production. What I mean is the specialty, number of cases they intend to bring to the center, the reimbursement for those cases. Second would be the proforma, which would spell out the expenses and expected profit (or loss) in the first year. Third would be the financial condition of the physicians in the group Q: After an ASC has identified the bank it wants to secure the loan from, what should be the first few steps to start and move the process along effectively? AM: The more complete package you can give them, the easier...
Words: 439 - Pages: 2
...860 Transfers and Servicing 10 Overall 15 Scope and Scope Exceptions | > Overall Guidance 15-1 The Scope Section of the Overall Subtopic establishes the pervasive scope for all Subtopics of the Transfers and Servicing Topic. Unless explicitly addressed within specific Subtopics, the following scope guidance applies to all Subtopics of the Transfers and Servicing Topic, with the exception of Subtopic 860-50, which has its own discrete scope. > Entities 15-2 The guidance in the Transfers and Servicing Topic applies to all entities. > Transactions 15-3 The guidance in the Transfers and Servicing Topic applies to the issues of accounting for transfers and servicing of financial assets. 15-4 The guidance in this Topic does not apply to the following transactions and activities: * a. Except for transfers of servicing assets (see Section 860-50-40) and for the transfers noted in the following paragraph, transfers of nonfinancial assets * b. Transfers of unrecognized financial assets, for example, minimum lease payments to be received under operating leases * c. Transfers of custody of financial assets for safekeeping * d. Contributions (for guidance on accounting for contributions, see Subtopic 958-605) * e. Transfers of ownership interests that are in substance sales of real estate (For guidance related to transfers of investments that are in substance a sale of real estate, see Topics 845 and 976...
Words: 4850 - Pages: 20
...ASC 740, Income Taxes, provides that a tax liability or asset shall be recognized based on the provisions of ASC740 for the estimated tax payable or refundable on tax returns for the current and prior years; and a deferred tax liability or asset shall be recognized for the estimated future tax effects attributable to temporary differences and carryforwards. Deferred tax liabilities are measured by multiplying the applicable tax rate by the taxable temporary differences while deferred tax assets are measured multiplying the applicable tax rate by the deductible temporary differences and operating loss carryforwards, plus tax credit carryforwards (ASC 740-10-30-5). The applicable tax rate utilized in the measurement of deferred tax assets (liabilities)...
Words: 471 - Pages: 2
...1. Was Beijing Jeep a success? After the Chinese reform and openingup policy led by Deng Xiaoping, China attracted many foreign direct investment because China aims to increase their economic growth, infrastructure, technology and other industries. During that time, the only way a foreigner company could enter the Chinese market was through a joint venture and this is how Beijing Jeep emerged in 1984. It was a huge step that an American firm could extend their business to one of the biggest markets in the world, however we consider that Beijing Jeep was not successful in China, because during this period, the economy of China was not stable and the Chinese market was not able to purchase this type of goods. Also, when the joint venture started, the production of vehicles was difficult compared to their expectation, due to different perspectives related to the production line. One of the main challenges was the foreign exchange to pay for the import of the kits coming from United States, because the Chinese government did not allow the export of hard currency. Beijing Jeep could continue their production line because they reached an agreement with the Chinese government to eventually release hard currency. Besides, they get a high support from them as investment in infrastructure and require ordering Jeeps when ...
Words: 1238 - Pages: 5
...drug. * If at any time the project is scrapped the amount received by Pharmagen is non-refundable. * After completion of drug X the PEI will receive future royalties based on the sales of the new product, and they will also receive royalties on an existing Pharmagen drug for a defined period of time. * Pharmagen will retain all intellectual property rights and there are no other agreements between the two parties. Based on this fact pattern I would argue that treatment related to ASC 730-20 is applicable. With regard to this accounting standard for research and development, the issue now lies with whether the funding is a liability to repay the PEI or an obligation to perform contractual services. In order to prove that a liability does not exist there must be a transfer of risk from Pharmagen to the PEI that is substantive and genuine (ASC 730-20-25-4). To determine whether risk has been transferred and several factors must be taken into consideration. ASC 730-20-25-6 gives four conditions that lead to the presumption that Pharmagen will repay, and thus creating a liability. Based on the fact pattern given in the case, none of...
Words: 335 - Pages: 2
...Surgery Centers (ASCs) were developed in the health sector for providing instant surgical care, treatment and prevention of diseases. ASCs have improved the outpatient health care services in United States as compared to hospital based inpatient care programs (Becker & American Health Lawyers Association, 2006). The program has gained a good reputation due to high quality services and positive results experienced by patients. ASCs are subject to transparency and accountability and are expected to comply with the state standards of providing health care. The number of ASCs in U.S has increased with the current working ASCs estimated to be over 5,000. They work is over sighted by Medicare and Medicaid Services to ensure they adhere to health and safety ethics. Strategies I would use as a ASCs manager to increase referrals to my ASC while maintaining high patient satisfaction scores. Establishing referral linkages with other physicians to increase the volume of patients referred to my ASC. Physicians are devoted to maintaining a good working relationship with other physicians. For instance a patient might visit a physician with a leg problem but the pain stems from the spine. The patient can be referred to a spine surgeon in the area thus creating a good rapport between the two physicians. Maintaining a network of physicians in an area, who can communicate and refer cases to their colleagues is a major step in increasing the number of patients served by ASC. Once a referral...
Words: 946 - Pages: 4
...entity’s status as VIE/non-VIE has changed? ASC 810-10-35-4 identifies five specific types of events that lead to reconsideration of VIE status, and ASC 810-10-35-4 also provides guidance on the circumstances in which the entity has incurred operating losses since the initial determination date, stating, “A legal entity that previously was not subject to the Variable Interest Entities Subsections shall not become subject to them simply because of losses in excess of its expected losses that reduce the equity investment” (emphasis added). Consequently, if the amount of the equity investment at risk at the entity’s inception (or when a reporting entity first became involved with the entity) was determined to be sufficient, losses later incurred by that entity do not by themselves require a reporting entity to reconsider whether the entity has sufficient equity in accordance with ASC 810-10-15-14(a). A reporting entity must consider all pertinent facts and circumstances in assessing whether an event that meets the criteria in ASC 810-10-35-4(a) through 35-4(e) has occurred. Insignificant events do not always result in a reconsideration of an entity’s VIE status. An event’s significance depends on whether the event appears to have changed the sufficiency of equity investment at risk or on whether the characteristics of the holders of equity investment at risk have changed. (For guidance on isolating the impact of a change under ASC 810-10-35-4(a) through 35-4(e), see Q&A 3.46.) ...
Words: 4421 - Pages: 18
...the Accounting Standards Council (ASC). The ASC receives its mandate from the Accounting Standards Act, which came into effect on 01 Nov 2007. It is responsible for prescribing accounting standards for companies, charities, cooperative societies and societies in line with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). The formulation of accounting standards in Singapore follows a formal and rigorous process that comprises four successive stages—namely exposure, reviewing of comments, post exposure and Issuance of final standards. Exposure Stage The exposure stage is triggered in response to the IASB issuing an Exposure Draft (ED) on new IFRS; amendments to existing IFRS, International Accounting Standard (IAS); a draft Interpretation of the International Financial Reporting Interpretations Committee (IFRIC) or amendment to an existing Interpretation. ASC proceeds to issue its own ED on the proposed equivalent FRS (ED FRS) or draft Interpretation (ED INT FRS) for public comments. Extensive effort is also expended to proactively seek feedback from about 50 interested parties, comprising industry associations, Governmental bodies, listed companies, banks, securities firms and academic institutions. The ASC may also conduct separate public consultations to solicit comments on specific areas covered in the ED FRS or ED INT FRS. Reviewing of Comments The ICPAS’ ASC forms standing subcommittees, comprising...
Words: 1500 - Pages: 6
...auditor and management would like to know how to book presentation of cash flows through the use of a revolving line of credit is whether to report the amounts borrowed and repaid on a net basis or on a gross basis. FASB’s Accounting Standards Codification 230-10-45-7 states “information about the gross amounts of cash receipts and cash payments during a period is more relevant than information about the net amounts of cash receipts and payments.” (FASB, ASC 230-10-45-7). However it is often enough to report the net amount of these cash receipts and payments. ASC 230-10-45-8 states that net presentation if appropriate when there is a quick turnover with large amounts and short maturities. Solution 1 — Classification with the Statement of Cash Flows Buck should present the borrowing and payment activity as a cash flow from financing activities. ASC 230-10-45-14 states that “proceeds from issuing bonds, mortgages, notes, and from other short- or long-term borrowing” are a cash inflow from financing activities. Similarly, ASC 230-10-45-15 states that “repayments of amounts borrowed” are a cash outflow for financing activities. For these reasons Buck should present the borrowing and payment activity related to its revolving line of credit as cash flows under financing activities. Solution 2 — Gross versus net presentation Scenario 1 The first case involves the $100 million borrowing capacity with all draws from the line of credit being due on demand. Buck...
Words: 1560 - Pages: 7
...granted to Baked Beans employees as required by the merger agreement. • has been accounted for in accordance with ASC 805, Business Combinations. • consideration transferred amounts to $135 million, land and buildings should be recorded using the “in-use” valuation premise and intangible assets should be recorded at fair value. • ASC 718, ASC 805-10-25-23, ASC 805-20-25-4, ASC 805-20-30-6, ASC 805-30-25, ASC 805-30-30-7, ASC 805-30-30-9, ASC 805-30-30-11, ASC 820-10-35-10, ASC-820-10-35-11. Consideration Transferred • ASC 805-30-30-7 requires that an acquirer measure and recognize the fair value of the consideration transferred in a business combination as of the acquisition date. • ASC 718 is applied to measure the share based payment awards. • Consideration transferred may include cash, other tangible and intangible assets, business and subsidiary of acquirer, contingent consideration, equity instrument etc. Common Stock • According to ASC 805, equity securities (common stocks) issued as consideration in business combination should be measured at fair value as of the acquisition date. Contingent Consideration • ASC 805-30-25 states that the acquirer shall recognize the acquisition date fair value of contingent consideration as part of the consideration transferred in exchange for the acquiree. Replacement Stock Option • ASC 805-30-30-9 states that if the acquirer is obligated to replace the acquiree awards, either...
Words: 289 - Pages: 2
...the accounting treatment for new income tax? What is the accounting treatment for training employees? 4. Does Energy have obligations to install smoke filters this year? What is the accounting treatment for installing smoke filters in Energy’s factories next year? SUMMARY CONCLUSION ON ACCOUNTING QUESTIONS 1. Energy should recognize and accrue the liability of clean up lands in this year. Energy should charge clean up costs to expenses. 2. Energy has no obligations to undertake the soil remediation in Dirty country. 3. Energy should recognize the retraining costs to compensation expenses. 4. Energy should recognize install smoke filters to expense. AUTHORITATIVE AND INTERPRETIVE GUIDANCE CONSIDERED Refer to ASC 410-20-25-1 (Background for...
Words: 1277 - Pages: 6
