The Fasb Codification Topic 320 : Investments Debt And Equity Securities

Introduction to the Financial System Financial Instruments Financial instruments can be: • Equity This is usually through the selling of common shares and/or common stock. It gives the buyer some ownership of the firm and thus, voting power when it comes to electing the board of directors. Debt This is money that is borrowed from someone else. Debt must be repaid at set intervals. Debt can be divided into short and long-term debt. This should follow the matching principle where short-term assets should be funded with short-term debt.

The US Securities and Exchange Commission (SEC) is the US federal agency that holds the primary mandate to enforce federal securities laws and regulations to control the securities industry and the country’s stock exchange and regulation of all activities and organizations including the US electronic securities market. The SEC is committed to promoting a market environment that yields public trust characterized by integrity to attain its mission of protecting investors through maintenance of fair and efficient markets through facilitation of capital information (Basagne, 2010). The SEC financing is a major area of focus since there has been major concern regarding the SEC agency financing and whether they utilize the

Under FASB ASC 805-10-25-23, acquisition related costs in business combinations are reported as an expense at the time of their occurrence by the acquiring company. This was a change from the previous way of capitalizing acquisition related costs for all business combinations and was established for all business combinations complete on or after January 1, 2009. This was a needed change in accounting because the acquisition costs do not represent a future value, are not a part of the value of the business being purchased, and would be expensed if the decision was made not to acquire the company being evaluated.

Assets are to be recorded and valued based of the type of asset there are.

For this reason, among others, Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Section 480 contains extensive guidance on distinguishing liabilities from equity. However, it is first necessary to determine if this Code section is applicable. ASC 480-10-15-3 states:

GAAP, but are provided here to give the statement users a more precise understanding of the financial position of the entity.

“The total equity investment (equity investments in a legal entity are interests that are required to be reported as equity in that entity’s financial statements) at risk is not sufficient to permit the legal entity to finance its activities without additional subordinated financial support provided by any parties, including equity holders.”

There are uncertainties in whether a receivable is sold or being used as a collateral for a loan. Thus, FASB has provided guidelines to distinguish between the two. FASB ASC 860-10-40-3 states that a financial asset should be considered sold and therefore should be derecognized if it is transferred and control is surrendered. Moreover, when control over the receivables is not surrendered, the transaction should be treated as a collateralized borrowing. FASB ASC 860-10-40 on the subject of conditions for a sale of financial assets states that a financial asset should be considered sold if it is transferred and control is surrendered. Control is deemed to be

The objective of AASB 116 is to stipulate the accounting treatment for property, plant and equipment, make user can understand information about an entity’s investment in its property, plant and equipment, and the changes in entity’s investment. The main issue for property, plant and equipment in accounting are the recognition of relationship between assets, the determination of their carrying amounts, the depreciation charges and impairment losses. AASB 116 required the entity disclose it’s information of gross carrying amount, depreciation method, depreciation rate, useful lives of PPE, accumulated depreciation and reconciliation of carrying amount at beginning of the reporting period and at end of the reporting period.

firm’s financing, for example, issuing or repurchasing stock and borrowing or repaying loans. It also

* issuance of debt to repurchase and retire shares in fiscal years 1998 and then again in 1999

A logical place to begin the analysis is with the appropriateness of the acquisition price. Are the asset values sufficient to support the loan? Is the buyer overpaying?

AASB 138 defines intangible assets as “identifiable non-monetary assets without physical substance”. Such assets include but are not limited to goodwill, trademarks, patents and research and development. AASB 138 Intangible Assets has been implemented to prescribe the accounting treatment for intangible assets that have not been specifically dealt with in any other standard. Therefore, this standard only applies to intangible assets that have not been previously dealt with. Furthermore, it can be established that this standard is an example of normative accounting theories because the standard prescribes what should be done, rather than predicts what people may do. According to AASB 138 Intangible Assets, in order for an asset to be recognised in the financial statements it must meet specific criteria. The required criterion states that the asset must be identifiable, the entity has control of the asset, future economic benefits are probable and the cost of the asset can be measured reliably.

The advantages to a LLC are: 1) Reduction of personal liability. A sole proprietor has unlimited liability, which can include the potential loss of all personal assets. 2) Taxes. Forming an LLC may mean that more expenses can be considered business expenses and be deducted from the company’s income. 3) Improved credibility. The business may have increased credibility in the business world compared to a sole proprietorship. 4) Ability to attract investment. Corporations, even LLCs, can raise capital through the sale of equity. 5) Continuous life. Sole proprietorships have a limited life,

IAS 39 regulate about the recognition and measurement financial asset and liabilities. Under this standard, financial asset classified under four types which are: financial asset valued under fair value, Loan and Receivable (L&R), Available for Sale (AFS), and Hold to Maturity (HTM). Each classification has different treatment of measurement which are under FVA and amortisation.