ACC 640 Accounting Theory and Policy Formulation Assignment

Reference no: EM132817410

ACC 640 Accounting Theory and Policy Formulation - Depaul University

Fair Value Disclosures Assignment

Instructions: The purpose of this assignment is for you to learn more about the fair value disclosure requirements included in the FASB Accounting Standards Codification (the Codification). You will do so by examining fair value disclosuresincluded in the following filings:

- Form 10-K for The Goldman Sachs Group, Inc. (GS) for the fiscal year ending December 31, 2020 (filed with the SEC on February 22, 2021).

Most of the questions in this assignment can be answered by referring to the Notes to the Financial Statements (Footnotes) in theseSEC filings. Feel free to copy and paste answers when it is appropriate to do so.

1. What is the amount of net unrealized losses on Goldman Sachs' trading cash instruments assets classified within Level 3 of the fair value hierarchy for a) the year ended December 2020 and b) the year ended December 2019? For each amount what information is provided as to what contributed to the net unrealized loss?

2. What items were transferred intoLevel 3 from Level 2 for the trading cash instrument assets for the year ended December 2020? What triggered these items to be transferred? What items were transferred out ofLevel 3 to Level 2 for trading cash instrument assets for year ended December 2020? What triggered these items to be transferred?

3. How does Goldman Sachs describe "derivatives"? How does Goldman Sachs' describe its two types of overthecounter (OTC) derivatives?

4. Goldman Sachs indicates that it "enters into various types of derivatives." Identify and describe the three types of derivatives that Goldman Sachs says it entersinto.

5. Goldman Sachs says that, "The firm's level 2 and level 3 derivatives are valued using derivative pricing models (e.g., discounted cash flow models, correlation models, and models that incorporate option pricing methodologies, such as Monte Carlo simulations). Price transparency of derivatives can generally be characterized by product type." What are the "product types" that are being referred to?

6. Goldman Sachs also says, "Level 3 derivatives are valued using models which utilize observable level 1 and/or level 2 inputs, as well as unobservable level 3 inputs". For each of the product types from the answer to the previous that are Level 3derivatives, describe the unobservable inputs used in the fair value measurement.

7. How does Goldman Sachs characterize a)over the counter (OTC) and b) exchange-traded derivatives that are included within Level 2 of the fair value hierarchy?

General Questions

8. Compare the information disclosed by Microsoft to comply with the fair value disclosure requirements found inSection 820-10-50 of the Codification with that provided by Goldman Sachs. What is your opinion of the overall value of the information disclosed by each firm?To answer this question, focus on the understandability and usefulness of the disclosures to the users of the financial statements. Finally, compare the extent of Microsoft's disclosures to those made by Goldman Sachs. Why do you think that there is a difference in the level of disclosure detail for the two companies?

9. FASB released ASU 2018-13 in August 2018. This ASU impacts the disclosures for fair value measurement (ASC 820).
a. Why did FASB issue this update?
b. Who is affected by the amendments in this update?
c. The main provisions of the ASU fall into what three categories?
d. When is ASU 2018-13 effective?

Attachment:- Accounting Theory and Policy Formulation.rar

Reference no: EM132817410

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