[Business 70-252] - Final Exam Guide - Comprehensive Notes fot the exam (24 pages long!)
29 Mar 2017
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Information for decision-making: type of instrument (debt vs. equity, management"s intent, ability to reliability measure instrument"s fair value, company strategy. If it is interest-bearing, party receives all the interest since the last payment date. If it is non-interest-bearing, the price of the bond/instrument = Impairment models: investment must be reviewed for possible impairment to ensure that future benefit justifies the valuation on the balance sheet, incurred loss model, carried out only if there is evidence of possible impairment. Impairment loss is recognized in net income as the difference between carrying amount and the revised pv of expected cash flows. Interest income is recognized based on cash flow estimates and the discount rate: expected loss model. Impairment test carried out continuously: fair value loss model. Impairment loss is recognized in net income as the difference between carrying amount and fair value.
