Case analysis: Classification of instruments in fair value hierarchy Instrumental 1 In the case, there was a significant decrease in the volume and activity for the instrument because of (1) significant widening of the bid-ask spreads in the markets and the widening continued throughout Q4 2012 (2) a significant decrease in the volume of trades comparing with historical level in Q4 (3) no recent transactions. According to 820-10-35-54-c, it was reasonable to determine that market is not active…

Fair Value Accounting and Audit Ivie Uduebho 4/30/2015 Introduction In today’s businesses, there has been an increase in the demand for financial reporting and also, the need to have reliable measurements of fair value and its disclosures. The need for reliable information has caused continuous change to accounting policies which has posed a challenge not only to management of companies, but also to auditors. The frequent changes in accounting principles…

Memorandum to: Accounting department of family finance co. from: Daisy subject: fair value hierarchy date: december 15, 2012 Introduction Family Finance Co. (FFC), a publicly traded commercial bank, invests in a variety of securities in order to enhance returns greater than interest paid on bank deposits and other liabilities. The primary investments of FFC are collateralized debt obligation, mortgage-backed securities, auction-rate securities, equity securities in nonpublic companies, interest…

| Abstract This document is concerned with the relationship between the financial crisis and fair value accounting. Its purpose is to make an understanding of the strengths and limitations of fair value accounting. The report also gives some examples of fair value accounting measures used in several Australian companies. In this report, City Weat Water LTD and JB HI-FI LTD are used to explain that. Introduction With the modern transportation and communication technology development, in the industrial…

Moving towards Fair Value Accounting In the past, historical cost measures were mainly used for reporting as they are reliable. However, historical cost is only relevant upon acquiring the asset and becomes irrelevant as time passes. On the other hand, fair value-based reporting, which accounts for changes in fair values, can produce balance sheet figures that provide a better reflection of the company’s value. This is also why accounting bodies are moving towards fair value accounting (FVA). One…

IFRS: Companies may use either historical cost or revalued amount. Revalued amount is fair value at date of revaluation less subsequent accumulated depreciation and impairment losses (Touche, 2009). Canadian and U.S. GAAP use historical cost as the basis of measurement for property, plant and equipment (Touche, 2009). Revaluations are prohibited in both Canadian and U.S. GAAP (Touche, 2009). So what does that mean for companies not sure of what to choose or needs guidance? Even when a particular…

Case 11-2(b) Fair Value Disclosures Case 11-2(b) is an extension of Case 11-2(a). For this case, assume that the Case 11-2(a) facts remain, with the exception of the additional assumptions listed below for each security. As stated in Case 11-2(a), Family Finance Co. (FFC) accounts for its investments at fair value, with changes in fair value reflected either in earnings (for trading securities) or other comprehensive income (OCI) (for available-for-sale (AFS) securities). 1 Because FFC uses…

Abstract This paper is written for the accounting theory course as a course project. This paper discusses the differences between the historical cost accounting approach and the fair value accounting approach. The discussion will focus on the debate on using which accounting approach. We begin by stating the definitions of both concepts and discussing them thoroughly, then we state the main advantages of the two approaches followed by comparison between them. The last section of this paper discusses…

For our project, we wanted to pick the topic, “Is fair value accounting really fair?” The first part of our presentation was simply explaining what fair value accounting is. This is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transactions. According to the Financial Accounting Standards Board, the price that would be received to sell an asset or price to transfer a liability in an orderly transaction between…

Probability of retention is important because it will have a huge impact on customer value and goodwill impairment. The following table will illustrate how different retention rates can affect goodwill impairment. For the next step, we will ask management for historical customer attrition data or other support to confirm the accuracy of the 75% retention rate assumed. Retention Rate | Customer Relationship value | Goodwill | Goodwill Impairment | 65% | 21 | 27 | 130 | 70% | 24 | 24 | 133 |…