Case 13-8: Accounting for a Loss Contingency for a Verdict Overturned on Appeal 1. According to the case, it shows that management of M determined that a loss would be “probable” and the estimate range would be $15 million to $20 million. However, they determined $17 million would be the “most likely” amount of loss. According to ASC 450-20-25-1, “When a loss contingency exists, the likelihood that the future event or events will confirm the loss or impairment of an asset or the incurrence of a liability can range from probable to remote. As indicated in the definition of contingency, the term loss is used for convenience to include many charges against income that are commonly referred to as expenses and others that are commonly referred to as losses.
Therefore impairment exists. ASC 320-10-35-33A: If an entity intends to sell the debt security (that is, it has decided to sell the security), an other-than-temporary impairment shall be considered to have occurred. ASC 320-10-35-33B: If an entity does not intend to sell the debt security, the entity shall consider available evidence to assess whether it more likely than not will be required to sell the security before the recovery of its amortized cost basis (for example, whether its cash or working capital requirements or contractual or regulatory obligations indicate that the security will be required to be sold before a forecasted recovery occurs). If the entity more likely than not will be required to sell the security before recovery of its amortized cost basis, an other-than-temporary impairment shall be considered to have occurred. ASC 320-10-35-33C: If an entity does not expect to recover the entire amortized cost basis of the security, the entity would be unable to assert that it will recover its
This is consistent with FASB codification ASC250-10-45-23 2. What effect, if any, does eVade’s decision to participate in the tax amnesty program have on the amount recognized as of March 31, 2012? According to ASC250-10-50-9 the participation in the tax amnesty program will cause a liability to be recorded in the current year statements and adjustments for prior periods. If comparative financial statements are issued, the prior year column will need to reflect the adjustment and a change in opening balance (retained earnings) for the current year. 3.
The conservatism principle involves “recognizing expenses and liabilities as soon as possible when there is uncertainty about the outcome, but to only recognize revenues and assets when they are assured of being received” (The conservatism principle). Requirement 2 – B Hudson’s wholesale inventories should be reported on the balance sheet at the replacement cost amount. The text indicates that the replacement cost is less than the NRV (or ceiling) and more than the NRV-NP (or floor) making the
Peter Swap I. Issue: Will recognizing compensation expense as part of Mizri Corporation’s stock compensation plan faithfully represent the exchange? II. GAAP List: * 718-10-30-22: An equity instrument for which it is not possible to reasonably estimate fair value at the grant date shall be accounted for based on intrinsic value * 718-20-35-3: A modification of an equity award shall be treated as an exchange of the original award for a new award incurring additional compensation cost for any incremental value III. Alternatives: A.
They test their goodwill for impairments annually. The steps to test for it are to estimate the fait market value, compare the fair value with carrying amount (if carry value is more than the fair value, goodwill is impaired), and the company records the impairment loss equalling excess of carrying value over fair market value of goodwill. 5. Certain other indefinite-lived intangibles and other long-lived assets (including intangible assets with a finite life) are also subject to impairment assessment. Did Nike incur any of these impairment charges in 2009?
The sum of the market or appraised values of identifiable assets acquired less the fair value of liabilities assumed exceeded the cost to Easton. After revaluing noncurrent assets to zero, there was still some “negative goodwill.” Proper accounting treatment by Easton is to report the amount as A. part of current income in the year of combination. B. a deferred credit and amortize it. C. an extraordinary gain. D. paid-in capital.
d. What about break even in order to achieve their profit goal? e. You can assume that the advertising/promotion budget(s) represent fixed costs. 5. What is your appraisal of the introductory promotion program being recommended by Marketing Momentum Unlimited? That is, what is your analysis of their: a.
Factors for consideration a. law’s non-logical implications in interpretation what parties would’ve agreed to (ex. Haines: duration and scope of contract) - policy: at-will doctrine in employment: policy - would’ve agreed to terms had they anticipated situation - had in mind, but didn’t express it b. context - what is the objective of the contract? Is it ambiguous? Ex. Spaulding v. Morse (369): stop yearly payment to trust during time in armed services - enforce according to terms if unambiguous, consider context if terms are ambiguous - not only context at time of contract formation, but also what happened AFTER ⇨ changed circumstances - why look at context?
We will calculate some ratio’s to understand the financial position of the company, before we start with an analysis of the risks. The variables about the firm’s environment, the governance, the strategy, financial structure and operations are essential the firm. Current financial situation Liquidity ratios: Year Current ratio= Current Assets/Current Liabilities Quick ratio= Cash+Accounts Receivables+Other Assets/Current Liabilities Cash ratio= Cash+Other Assets/Current Liabilites 1989 39254/22733=1,727 5621+22601+3298/22733=1,336 5621+2139/22733=0,341 1990 33196/19233=1,726 3053+20119+3298/19233=1,376 3053+3298/19233=0,330 1991 36204/21998=1,646 4032+17736+4628/21998=1,200 4032+4628/21998=0,394 1992 41349/27291=1,515 11327+14195+5220/27291=1,126 11327+5220/27291=0,606 1993 50192/18147=2,766 17272+17596+5220/18147=2,209 17272+5220/18147=1,239 Current ratio: is the ration to measure whether the firm has enough resources to pay its debt over the next 12 months. We can see that the current ratio is increasing from 1989 till 1993. Quick ratio: is the ratio to ascertain whether a company’s short-term assets are readily available to pay off its short-term liabilities.