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In this module, we focus on how to measure investments in marketable securities by market value. Firms may also use market value to measure their own liabilities based the quotes of their own credit worthiness. Thus, the market value of their liabilities increases as their credit quality improves and vice versa. The increase in the market value of their own liability would result in fair-value losses. The decrease in the market value of their own liabilities would result in fair-value gains.
For example, HSBC reported $6.6 billion fair-value gains due to its own credit deterioration over 2008, but reported a fair-value loss of $2.5 billion for the first half of 2009 as its credit quality improves. The International Accounting Standards Board (IASB)'s and the US Financial Accounting Standards Board's (FASB)'s inclusion of their own credit risk in liability measures have been controversial. One may argue that to report a gain on their liabilities as a direct result of their own creditworthiness deteriorating, is misleading and counterintuitive. Others argue that excluding their own credit risk from liability measurement creates a mismatch between assets and liabilities held at fair value.
Discuss: Question 1: What do you think? Should we include a firm's own credit risk when measuring the market value of its debt? What are the advantages and disadvantages?
Court for $450,000 but the entity did not agree to the settlement. On December 31, 2019, what amount should be reported as liability from lawsuit?
Co publishes the 2018 financial statements on 3/15/19. How much of the $150,000 note should Co show as a current liability on the 2018 financial statements
sand soap company management is analyzing the companys standard cost variances for direct materials for the most recent
The cost of direct materials is $2.10 per yard. Calculate the total cost of direct materials to be purchased in September
Explain why OI's treatment resulted in an increase to the earnings
Zurasky Corporation is considering two alternatives: A and B. Are the materials costs and processing costs relevant in the choice between alternatives A and B
MacKenzie-Rabb, Inc., is a Texas-based manufacturer and distributor of components and replacement parts for the auto, machinery, farm, and construc- tion equipment industries.
How much must he invest in a bank every month for the next four years at 9% compounded monthly to accumulate the stated amount
The payroll register for Proctor Company for the week ended February 14 indicated. Journalize the entry to record the payroll for the week of February 14.*
1.The following account balances were taken from the 2013 post closing trial balance of the Bowler Corporation:
Discuss the nature of accounting misstatements and the implication of each to fair presentation of the financial statements
Winrow Company received proceeds of $565,500 on 10-year, 8% bonds issued on January 1, 2013. The bonds had a face value of $600,000, pay interest annually.
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