Solutions For Advanced Accounting, 5th Edition Hamlen
1. Financial Statements
Intended for users to help them assess the profitability and stabiity of reporting
entity
2. Used by
External users to help them make their resource allocation decisions and to
assess the stewardship of management
3. GAAP Principles
Relevant, reliable, understandable, comparable
4. The financial statement concepts describe the principles and assumptions
underlying the preparation of financial statements
• The objective of general-purpose financial reporting
• Qualitative characteristics of useful financial information
• Underlying assumptions
• Definition, recognition, and measurement of the elements of financial
statements
5. Judgment
The ability to make a decision in situations in which the answer is not clear-cut.
Professional judgment is the ability to make decisions for issues encountered by
professionals in carrying out their day-to-day responsibilities. It is a skill
developed over many years of studying and learning from one's experiences.
6. Equity Investments (2 types)
Strategic and Non-Strategic
7. Strategic
- Significant Influence, joint control, control ,
- Investor intends to maintain long term operating relationship with entity and
has some influence over decision, influence varies based on level of control
Significant Influence - Equity Method
Control - Full consolidation
Joint Control - Equity Method
, 8. Significant Influence
Identified by
- BOD
- Material Transaction
- Owning 20-50%
- Taking part in policy making
- Interchange of personnel
9. Non- Strategic
- Investor is hoping for a reasonable return without having to play an active role
FVTPL – Fair value method and unrealized gains reported in net income
FVTOCI other – elect fair value – unrealized gains reported in comprehensive
income
10. FVTPL
Record Acquisition
Debit Investment
Credit Cash
Receipt of Dividend
Debit Cash
Credit Divident income
To record Investment at fair value
Debit investment
Credit Unrealized Gains (reported in net income)
Record Sale of Investment
Debit Cash
Credit Investment in Safe buy
Credit Gain on sale (reported on Net Income)
1. Financial Statements
Intended for users to help them assess the profitability and stabiity of reporting
entity
2. Used by
External users to help them make their resource allocation decisions and to
assess the stewardship of management
3. GAAP Principles
Relevant, reliable, understandable, comparable
4. The financial statement concepts describe the principles and assumptions
underlying the preparation of financial statements
• The objective of general-purpose financial reporting
• Qualitative characteristics of useful financial information
• Underlying assumptions
• Definition, recognition, and measurement of the elements of financial
statements
5. Judgment
The ability to make a decision in situations in which the answer is not clear-cut.
Professional judgment is the ability to make decisions for issues encountered by
professionals in carrying out their day-to-day responsibilities. It is a skill
developed over many years of studying and learning from one's experiences.
6. Equity Investments (2 types)
Strategic and Non-Strategic
7. Strategic
- Significant Influence, joint control, control ,
- Investor intends to maintain long term operating relationship with entity and
has some influence over decision, influence varies based on level of control
Significant Influence - Equity Method
Control - Full consolidation
Joint Control - Equity Method
, 8. Significant Influence
Identified by
- BOD
- Material Transaction
- Owning 20-50%
- Taking part in policy making
- Interchange of personnel
9. Non- Strategic
- Investor is hoping for a reasonable return without having to play an active role
FVTPL – Fair value method and unrealized gains reported in net income
FVTOCI other – elect fair value – unrealized gains reported in comprehensive
income
10. FVTPL
Record Acquisition
Debit Investment
Credit Cash
Receipt of Dividend
Debit Cash
Credit Divident income
To record Investment at fair value
Debit investment
Credit Unrealized Gains (reported in net income)
Record Sale of Investment
Debit Cash
Credit Investment in Safe buy
Credit Gain on sale (reported on Net Income)
