課件案例教案module

FinancialaccountingandreportingWangLeiCPA(US)activeMemberofAmericanInstituteofCertifiedPublicAccountantsModule18BusinesscombinationandconsolidationsScopeASCtopic805appliestobusinessacquisitionNOTapplytotheformationofjointventuresTheacquisitionofassetsorgroupofassetsthatdonotconstituteabusinessCombinationofentitiesundercommoncontrolAScope-AcquisitionmethodAssetacquisitiona.iftheassetsandliabilityacquireddonotconstituteabusinessb.inanassetacquisition,assetsarerecordedattheamountofcashpaid,orthecostofassets.Iftheassetsarenotacquiredwithcash,recordedatFV(givenoracquired,dependsonwhichismorereliable)c.ifassetsareacquiredinagroup,thecostofeachassetisdeterminedbyallocatingthetotalcosttotheindividualbasedonrelativeFVd.NOgoodwillisrecordedinanassetacquisitionAScope-AcquisitionmethodDefinitionofabusinessAnintegratedsetofactivitiesandassetsthatiscapableofbeingconductedandmanagedforthepurposeofprovidingareturnintheformofdividends,lowercosts,orothereconomicbenefitsdirectlytoinvestorsorotherowners,membersorparticipantsAScope-AcquisitionmethodAcquiree:businessthatisbeingacquiredAcquirer:theentitythatobtaincontroloftheacquireeAcquisitiondate:thedateonwhichtheacquirerobtainscontroloftheacquiree.Businesscombination:transactionoreventinwhichtheacquirerobtainscontrolofoneormorebusinessControl:generalruledirectlyorindirectlybyonecompanyofmorethan50%ofOSvotingsharesofanothercompanyconstitutecontrol.

AScope-AcquisitionmethodFourstepsinapplyingacquisitionmethod1identifytheacquirer2determinetheacquisitiondate3recognizeandmeasureidentifiableassetsacquired,liabilityassumed,andnocontrollinginterestintheacquiree.4recognizeandmeasuregoodwill,orrecognizeagainfromabargainpurchaseBtheacquisitionmethodforbusinesscombinationsAcquireridentificationNormallytheacquireristheentitythatobtainscontrolofacquireeHowever,ifitisunclear,oneofthecombinationentitiesmustbeidentifiedastheacquirerbyexaminingthefactsandcircumstances.1theentitythatretainsthelargestportionofvotingrightsisusuallytheacquirer2retainsmoreindividualsonitsgoverningbodyorinitsseniormanagement3thebusinesswasacquiredbyexchangingequityinterest,theacuirerisusuallytheentitythatpaysapremiumovertheFVoftheequityinterestoftheotherfirm.4theentitythatissignificantlylargerinsize,measuredbyitsassts,revenuesorearnings.BtheacquisitionmethodforbusinesscombinationsAcquisitiondateDateonwhichtheacquirerobtainscontrolovertheacquiree.Usually,thedateonwhichtheacquirertransferstheconsideration,acquirestheassets,andassumestheliabilitiesoftheacquirer.BtheacquisitionmethodforbusinesscombinationsRecognitionandmeasurementFVoftheidentifiableassetsacquired,liabilityassumedandnocontrollinginterestNewlyidentifiedIAonthedateofacquisitionSeepage721BtheacquisitionmethodforbusinesscombinationsRecognizegoodwillgoodwill:Anassetrepresentingthefutureeconomicbenefitsthatarisesfromotherassesacquiredinabusinesscombinationthatarenotindividuallyidentifiedandseparatelyrecognized.Formulaseepage721BtheacquisitionmethodforbusinesscombinationsNocontrollinginterestMeasuredbyusingtheactivemarketpricesontheacquisitiondatefortheequitysharesnotheldbytheacquirer.Acquisitionrelatedcosts1.Normallytreatedasanexpenseintheperiodinwhichthecostsareincurredortheservicesarereceived.Include:finders’legal,accounting,valuation,consultingandotherprofessionalfees.Alsoincludegeneraladmincosts2.NOTexpensedportion:costsofregisteringandissuingdebtandequitysecuritiesCostofregisteringandissuingcommonstockarenormallynettedagainsttheproceedsofthestockandreduceAPICBondissuecostareamortizedonastraightlinebasisoverthelifeofthebondBtheacquisitionmethodforbusinesscombinations1acquisitionofmorethan50%oftheoutstandingvotingstockwillnormallyresultincontrol.2VIEControloveranentitymaybeachievedthrougharrangementsthatdonotinvolveownershiporvotinginterest.IfanentityhasacontrollingfinancialinterestintheVIE,theentityisconsideredtheprimarybeneficiaryoftheVIECconsolidatedfinancialstatementsVIEcontinuedAdditionaldisclosurearerequiredforentitiesthathaveinterestsinVIEs.PresentseparatelyonthefaceofthestatementoffinancialpositionDisclosuresinthenotestoFSbyprimarybeneficiaryCconsolidatedfinancialstatementsBusinessCombinations/ConsolidationThedegreeofcontroltheinvestorhasovertheinvesteedictateshowtheinvestoraccountsfortheinvestmentincorporateequitysecurities.ConsolidatedFS(>50%)AcquisitionMethodSeeexampleonpage725Multiplechoice1-15Multiplechoice16-25Theconceptusedtopreparesubsequentconsolidatedstatementsareessentiallythesameasthoseusedtopreparetheconsolidatedbalancesheetattheacquisitiondate.FconsolidatedfinancialstatementssubsequenttoacquisitionMultiplechoice26-413generaltypesofpanytransactionsa.panysalesofmerchandiseb.transactionsinfixedassetsc.panydebt/equitytransactions.Seeexampleon737GpanytransactionsandprofitconfirmationsBalanceSheet–included100%ofthesub’sassetsandliabilitiesandreportNCIinconsolidatedequitySeeexampleon739;739-742Multiplechoice55-67pleteinformationAttheacquisitiondate,theaccountingforbusinesscombinationmaybeplete.ThentheprovisionalamountarerecordedTheprovisionalamountmayberetrospectivelyadjustedduringthemeasurementperiodThemeasurementperiodmayNOTexceedoneyear.JadditionalissuesregardingbusinesscombinationTransferofassetsAnyassetsaspartofconsiderationshouldbepremeasuredtoFVGainorlossontheremeasurementshouldbeincludedinearningsfortheperiodAfterbusinesscombination,theassetsmeasuredatcarryingamountJadditionalissuesregardingbusinesscombinationRecognitionandmeasurementissuesNormallyFVExceptions:Leaseclassification:recordedonacquirer’sbookbasedonclassificationattheinceptionoflease.However,modifiedatthedateofacquisition,classifiedasrequiredbymodifiedtermOperatingleaseTermsarefavorable,IArecognizedapartfromgoodwillTermsareunfavorable,liabilityshouldberecognizedJadditionalissuesregardingbusinesscombinationContingenciesContractualcontingencies-FVNocontractualcontingenciesAssesswhetheris“morelikelythannot”Ifso,FVatdateofacquisitionOtherwise,rulesforcontingenciesareapplied.Recallseebookpage744Bookd-jhomeworkJadditionalissuesregardingbusinesscombinationMultiplechoice68-77Module19DerivativeinstrumentsandhedgingactivitiesForeigncurrencytransactionTransactiondenominatedinacurrencyotherthantheentity’sfunctionalcurrency.Denominatedmeans:ThebalanceisfixedintermsofthenumberofunitsofaforeigncurrencyregardlessofchangesintheexchangerateSeeexampleonpage748AForeigncurrencytransactionsIfFSarepreparedbetweenthetransactiondateandthesettlementdate,theFASBrequiresthatreceivablesandliabilitiesdenominatedinacurrencyotherthanthefunctionalcurrencyberestatedtoreflectthespotratesinexistenceattheBSdate.Thesales/costaccountisnotaffectedbychangesinthespotrateSeeexampleonP749AForeigncurrencytransaction

Aggregatetransactiongain/lossisincludedintheentity'sneteTherecognitionofforeigncurrencytransactionsgainsandlossesonunsettledforeigncurrencytransactionsresultindeferredtaxassets/liability.Untiltheyeartheforeignexchangegainsandlossesarerealized.SeeexampleonP750AForeigncurrencytransaction

Multiplechoice1-9Financialinstrumentsinclude:Cash,accounts/notesreceivable,account/notespayable,bonds,commonstock,preferredstock,stockoptions,foreigncurrencyforwardcontracts,futurecontracts,Financialswapetc.Othercontractsmeetfollowing2criteria:SeeP750Bderivativeinstrumentsandhedgingactivities1.DerivativeinstrumentsSubsetoffinancialinstrumentsDerivativeinstrumentsaresocalledbecausetheyderivetheirvalueasafinancialinstrumentfromsomethingoutsidetheinstrumentitself.E.g.calloption,thevaluecanonlybedeterminedbythemarketpriceoftherelatedstock.BderivativeinstrumentsandhedgingactivitiesSeeexampleonP750Underlying:Therateorpricethatexistsoutsidethederivativeinstrumentthatisusedtodeterminethevalue.e.g.thestockpriceNotionalamount:Thenumberofunitsrelatedtothederivativeinstruments.E.g.sharesofstockBderivativeinstrumentsandhedgingactivitiesFairvaluemeasurementDerivativeinstrumentsmeetthedefinitionofassetsandliabilities.AssuchtheyshouldbereportedonFSMostrelevantmeasureforreportingfinancialinstrumentsisFVGainsandlossesshouldbeappearincomprehensiveeorcurrentearnings2foundationprinciplesforaccountingforderivativesandhedgingHedging(3kinds)SubsetofderivativeinstrumentsFairvaluehedgeAhedgeoftheexposuretochangeintheFVa)arecognizedassetsorliabilityb)unrecognizedfirmcommitmentCashflowhedgea)recognizedassetsorliabilityb)forecastedtransactionForeigncurrencyhedgea)unrecognizedfirmcommitmentb)anavailableforsalesecurityc)aforecastedtransactiond)anetinvestmentinaforeignoperation2foundationprinciplesforaccountingforderivativesandhedging3Characteristicsfinancialinstrumentorothercontractcontains:1)oneormoreunderlyingE.modityprice,interestrate,exchangerate,indexesrelatedtoanyoftheseitemsMorebroadly:creditrating,rainfall,temperaturechanges2)oneormorenotionalamountsNumberofcurrencyorotherunits3)settlementamountItiscalculatedusingtheunderlyingandnotionalamountinsomecombinationE.g.FVofstock*numberofsharesDistinguishnumberofunits(notionalamount)anddollarvalue(settlementamount)3definitionofaderivativeinstrumentMultiplechoice10-18InterestrateswapExchangeinterestpaymentExampleseeP753a(1)Intheexample,NotionalamountistheprincipleportionofdebtUnderlyingistheindexthatdeterminesthevariableinterestrate,suchassixmonthLIBOR4inclusioninandexclusionsfromderivativeinstrumentsHybridinstrumentsFinancialinstrumentsmaycontainfeatures(derivativeinstruments),thefinancialinstrumentsknowashybridinstruments.Thereisabasiccontractashostcontractthathasanembeddedderivativeinstrument.Inthesecircumstances,theembeddedderivativeinstrumentmayhavetobeseparatedfromthehostcontract,aprocessknowasbifurcation5embeddedderivativeinstrumentsandbifurcationIfbifurcationmustoccur,3criteriamustmet1embeddedderivativemeetsthedefinitionofaderivative2hybridinstrumentisNOTregularlyrecordedasFV3theeconomiccharacteristicsandrisksofembeddedderivativeinstrumentsareNOTclearlyandcloselyrelatedtothehostcontract.ExampleofhybridinstrumentsrequirebifurcationSeeP754(b)5embeddedderivativeinstrumentsandbifurcationMultiplechoice19-27Thereare2primarycriteria1.sufficientdocumentationmustbeprovidedthebeginningoftheprocesstoidentifyataminimuma)objectiveandstrategyofthehedgeb)hedginginstrumentandthehedgeditemc)howtheeffectivenessofthehedgewillbeassessonanongoingbasis2thehedgemustbehighlyeffectivethroughoutitslife6hedginginstruments-generalcriteriaFairvaluehedgea)hedgeoftheexposuretochangeintheFVa)arecognizedassetsorliabilityb)unrecognizedfirmcommitmentSpecificcriteriaThehedgeitemmustbeeitherallorportionofarecognizedasset/liabilityoranunrecognizedfirmcommitmentSeeexampleonp755Company(A)enterintocommitmenttopurchaseequipmentfrom(B)Firmcommitmentdate

HedgingagainstunrecognizedfirmcommitmentDeliverydateHedgingagainstarecognizedliabilityPaymentdateSeeexampleonP7557FairvaluehedgeCashflowhedgea)recognizedassetsorliabilityb)forecastedtransactionSpecificcriteria1.hedgedasset/liabilityandhedginginstrumentmustbelinked2.CFmustmeethighlyeffective3.ifthehedgeasset/liabilityisaforecasttransaction,mustconsideredprobable.4.iftheforecastedhedgeassets/liabilityisaseriesoftransactions,theymust“sharethesameriskexposure”Accounting:theeffectiveportionisreportedinOCIE.g.purchaseofaparticularproductfromthe