Reading 23: Reading 21: Intercorporate Investments-LOS a 习题精选 center, 2011, class

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Session 6: Financial Reporting and Analysis: Intercorporate Investments, Post-Employment and Share-Based Compensation, and Multinational Operations
Reading 23: Intercorporate Investments

LOS a: Describe the classification, measurement, and disclosure under the International Financial Reporting Standards (IFRS) for 1) investments in financial assets, 2) investments in associates, 3) joint ventures, 4) business combinations, and 5) special purpose and variable interest entities (SPEs, VIEs).

 

 

Mustang Corporation formed a special purpose entity (SPE) for purposes of providing research and development. An unrelated firm absorbs the expected losses of the SPE and the independent shareholders of the SPE receive the expected residual returns. Is the SPE considered a variable interest entity (VIE) according to FASB Interpretation No. 46(R) and is consolidation required by Mustang, respectively?

A) Yes; Yes.

B) No; No.

C) Yes; No.

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Since the shareholders do not absorb the expected losses, the SPE is considered a VIE. The unrelated firm (not Mustang) that absorbs the losses is the primary beneficiary and must consolidate the VIE.

[此贴子已经被作者于2011-3-9 15:26:44编辑过]

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Firm A recently leased equipment used in its manufacturing plant. If the leased asset is worth less than $100,000 at the end of the lease, Firm A will pay the lessor the difference.

Firm B provided debt financing to an unrelated entity. The debt has a provision whereby Firm B cannot be repaid until all other senior debt is satisfied.

Do Firm A and Firm B have a variable interest?

A) Only one has a variable interest.

B) Neither have a variable interest.

C) Both have a variable interest.

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A lease residual guarantee and subordinated debt are both examples of variable interests. Firm A will experience a loss if the leased asset is worth less than $100,000 at the end of the lease. Firm B will experience a loss if the senior debt is not paid in full.

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Which of the following securities would most likely be characterized as a held-to-maturity security?

A) Debt securities.

B) Debt or equity securities.

C) Equity securities.

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Only debt securities, that a company has a positive intent and ability to hold to maturity, can be characterized as a held-to-maturity security.

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Accounting standards for intercorporate investments establish different categories of securities with distinct ways of treating them on the financial statements of the company. One category requires the securities to be carried at fair value on the balance sheet with unrealized gains and losses excluded from the income statement. This category of security classification is called debt:

A) and equity securities available-for-sale.

B) securities held-to-maturity.

C) and equity trading securities.

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If securities are designated as debt and equity securities available-for-sale they can be sold to meet the liquidity and other needs of the company. As such, the securities are to be carried at fair value on the balance sheet with unrealized gains and losses excluded from the income statement.

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Which of the following statements is INCORRECT regarding the classification of debt and equity security investments?

A) If equity and debt securities are trading securities, any realized and unrealized gains and losses are reported in the income statement.

B) Debt held-to-maturity is reported in the balance sheet at amortized cost.

C) If equity and debt securities are available-for-sale securities, any realized and unrealized gains and losses are reported in the income statement.

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In the case of available-for-sale securities, unrealized gains and losses are excluded from the income statement and are reported as a component of shareholders' equity.

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Accounting standards for passive intercorporate investments include a category of securities that is carried on the company balance sheet at cost. This category of securities is called debt:

A) and equity trading securities.

B) securities held-to-maturity.

C) and equity securities available-for-sale.

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When debt securities are purchased with both the intent and ability to hold them until they mature, they are recorded on the balance sheet at cost.

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Which of the following statements about the various classifications of securities held by a firm is least accurate?

A) Trading securities are, by definition, current assets because the firm intends to trade these securities in the near term.

B) Equity securities of other companies cannot be classified as "held to maturity" under SFAS 115.

C) A firm which invests in the debt securities of another firm cannot classify these securities as "held to maturity" if they have the positive intent and ability to hold the securities until final maturity.

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Under SFAS 115, only debt securities, which the firm has the positive intent and ability to hold until final maturity, may be classified as held to maturity.

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Accounting standards for passive intercorporate investments establish different categories of securities with distinct ways of treating them on the financial statements of the company. Which of the following categories requires realized and unrealized gains and losses to be reported as income? Debt:

A) and equity trading securities.

B) securities held-to-call.

C) and equity securities available-for-sale.

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Accounting standards for passive intercorporate investments include, debt and equity trading securities, is for securities that, when acquired, are intended to be resold within a near term time horizon. They are classified as current assets on the balance sheet, with any realized or unrealized gains and losses reported as income.

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Which of the following statements regarding securities classified as held to maturity is most accurate?

A) Equity securities can be classified as "held to maturity" if the security pays a large and consistent dividend and management has decided to hold the security for more than five years.

B) Equity securities can be classified as "held to maturity" if the firm's management has decided to hold the security for more than five years.

C) Only debt securities can be classified as "held to maturity" securities.

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Only debt securities, which the firm has the positive intent and ability to hold until final maturity, may be classified as held to maturity.

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Which of the following securities will most likely be characterized as an available-for-sale security?

A) Debt or equity securities that are carried on the balance sheet at fair market value and may be sold for liquidity purposes.

B) Debt securities that a company has a positive intent and ability to hold to maturity.

C) Equity securities representing 30% ownership in another firm.

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Debt or equity securities that are carried on the balance sheet at fair market value and may be sold for liquidity purposes are likely to be considered as available-for-sale.