Intermediate Accounting Research Project

Financial Instruments A financial asset is something which is defined as an entitlement of future cash flows. However, a financial instrument is a broader term used to describe financial assets and other assets in which there are no organised secondary markets to trade them. However, a financial security is something that can be traded in a secondary market. Attributes of Financial Assets Financial assets are those that: • • • • Have a return of yield expressed in terms of percentage. Have risk in which there is probability the actual return will differ from the expected return. Are liquid in that they can be sold at current market prices with reasonable transaction costs. Are expected to have a set time-pattern of cash flows in or out.

The FASB Accounting Standards Codification® is the source of authoritative generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities.

11. Investors and creditors are particularly interested in this financial statement because it tells them what is happening to the company’s most important resource?

Classify each of the following transactions as arising from an operating (O), investing (I), financing (F), or noncash investing/financing (N)

Item 5.|  |MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES|  | |20|  |

| Firms who wish to obtain short-term secured loans generally have two major current assets available as collateral in the form of:Answer

Debt securities included under this topic include any investment that would be considered a loan to a company, municipality or the government and its agencies. These include corporate or municipal bonds and U.S. Treasury securities and other instruments expressly stated within the codification. Equity securities covered under this section must have an easily attainable market value and include corporate stock, U.S. Treasury securities, and business investments greater than 20%. In this case, the code will dictate the method of accounting to be used as well as financial statement presentation. (GAAP) (FASB ASC 320-10-05-2, 2016).

Is that make loans or buy bonds with long maturities are relatively more exposed to credit risk. Foreign exchange risk, is the risk that exchange rate changes can affect the value of an FI’s assets and liabilities denominated in foreign currencies. FIs can reduce risk through domestic-foreign activity. Liquidity risk, is the risk that a sudden and unexpected increase in liability withdrawals may require an FI to liquidate assets in a very short period of time and at low prices. Can be day-to-day withdrawals by liability holders are generally predictable. And are usually large withdrawals by liability holders can create liquidity

In 1973, the Financial Accounting Standards Board (FASB) was created and their mission is “to establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors, and users of financial information.” (FASB.org, 2009a). The FASB is a private, not-for-profit organization whose primary purpose is to develop generally accepted accounting principles (GAAP) within the United States. The Securities and Exchange Commission (SEC) designated the FASB as the organization responsible for setting accounting standards for public companies in the U.S. Therefore, the FASB plays a vital and important role in protecting the financial well being and the overall stability of our

Classify each of the following transactions as arising from an operating (O), investing (I), financing (F), or noncash investing/financing (N)

1. Noninterestbearing notes 2. Loss contingencies 3. Committed lines of credit 4. Accounts payable 5. Pledging arrangements __ Use accounts receivable as collateral.__ __ Often require compensating balance.__ __ Only formal credit instrument is the invoice.__ __ Effective interest higher than stated interest.__ Recorded if probable and amount is known or__ reasonably estimable.__

Similar to those which use Level 1 inputs, several of the above items are measured using both level 2 and level 3 information (JPMorgan Chase, 2013).

When entity’s financial instruments are traded and issue such instruments for trading in a public market (i.e. Listed on a stock exchange)

With all things considered, the board decided that a change in fair value being shown in net income is a more appropriate measurement for equity investments. The reasoning being that the realizable value of these investments could be realized by selling the equity instruments. In contrast, the realizable value of debt

(d) Mutual funds and venture capital funds and/or the related asset management companies, banks and public financial institutions formed