BU457 Chapter 1-11: Financial Accounting Theory - Chapter 1-11 Textbook Notes
Document Summary
Value-in-use discounted present value of future cash flows. Fair value (exit price/opportunity cost) amount that would be received or paid should the firm dispose of the asset or liability. Objective of financial statements to provide information to assist investors to make investment decisions. Structured investment vehicles (siv: created by lenders (banks, mortgages, other financial institutions, securitize holdings of mortgages, credit card balances, auto loans, and other financial assets, asset-backed securities (abs) Siv pools investments into tranches of similar quality credits: collateralized debt obligation (cdo) Liquidity put sponsor agreed to buy back the siv"s asset backed securities if the market was to collapse. Retention of the lowest-quality tranche by the sponsor, with various guarantees to reimburse purchasers for losses: credit default swaps (cds) Siv could hedge their risk by purchasing cdss. Derivative financial instruments that would reimburse the siv for all or part of credit losses on its abss: variable interest entities (vie)
