Fasb 14 Essay

276 WordsFeb 14, 20122 Pages
a) The guidance in this Subtopic applies to receivables and payables that represent contractual rights to receive money or contractual obligations to pay money on fixed or determinable dates, whether or not there is any stated provision for interest, with certain exceptions noted below. Such receivables and payables are collectively referred to in this Subtopic as notes. Some examples are the following: * Secured and unsecured notes * Debentures * Bonds * Mortgage notes * Equipment obligations * Some accounts receivable and payable. Because Wie signed a note for the equipment, the transaction meets the definitions of Secured and unsecured notes and equip. obligations. 835 – 30 – 15 -2 b) If an established exchange price is not determinable and if the note has no ready market, the problem of determining present value is more difficult. To estimate the present value of a note under such circumstances, an applicable interest rate is approximated that may differ from the stated or coupon rate. This process of approximation is called imputation, and the resulting rate is called an imputed interest rate 835 -30- 25-3 c) The discount or premium resulting from the determination of present value in cash or noncash transactions is not an asset or liability separable from the note that gives rise to it. Therefore, the discount or premium shall be reported in the balance sheet as a direct deduction from or addition to the face amount of the note. It shall not be classified as a deferred charge or deferred credit. 835 – 30 -45-1A Amortization of discount or premium shall be reported as interest expense. Issue costs shall be reported in the balance sheet as deferred charges. 835 – 30 – 45-

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