2009 F-7 Class Notes

2009 F-7 Class Notes - Becker CPA Review Financial 7 Class...

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Becker CPA Review – Financial 7 Class Notes 1 © 2009 DeVry/Becker Educational Development Corp. All rights reserved. FINANCIAL 7 CLASS NOTES Financial 7 includes the following: I. FINANCIAL INSTRUMENTS A. Financial instrument fair value disclosures and disclosures about concentrations of credit risk are required by all firms except 'small' private firms (assets < $100 million and no derivatives). B. Market risk disclosure is encouraged but not required. C. Derivatives get their values from some other instrument. Option, forward, futures and swap contracts are examples. Derivatives have terms indicating 'price', quantity and a settlement amount (or payment provision). Derivatives are reported at fair value. 1. If there is no hedging designation any gain or loss must be reported in the income statement. 2. When hedging the fair value of an asset or liability currently in the balance sheet, the gain/loss on the asset/liability and the loss/gain on the hedge are both reported in the income statement for the current year. The hedge must be expected to be highly effective in reducing the risk (or you're speculating). 3. If hedging the variability in future cash flows, the effective portion of the hedge goes into other comprehensive income and the ineffective portion is reported in net income for the current period. The effective portion is the 'E' in PUFE from F1. 4. Hedging foreign currency risks generally parallels comments above in C2. 5. Hedging future cash flow variability in connection with foreign currency parallels comments above in C3. II. STOCKHOLDERS' EQUITY A. The owners' equity section is illustrated on page F7-7 and should be reviewed for the details contained within it. B.
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This note was uploaded on 02/19/2011 for the course BMGT 360 taught by Professor Spina during the Spring '07 term at Maryland.

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2009 F-7 Class Notes - Becker CPA Review Financial 7 Class...

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