AC 300_FASB_WEBSITE EXERCISES

AC 300_FASB_WEBSITE EXERCISES - Class Participation...

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Class Participation Questions Board Activities - June 22, 2011 FASB Board Meeting 1. What type of risks did the Board decide should be the focus of the project on the “Accounting for Financial Instruments” to improve current disclosures? liquidity and interest rate risks of financial instruments. 2. What did the Board direct the staff to do before deciding on the requirements for expanded disclosures about certain risks associated with financial instruments? The Board directed the staff to undertake additional outreach with users to learn their views about the types of entities that should be required to provide expanded disclosures about those risks, for discussion at a future meeting. 3. What did the Board decide as the basis for determining which loan commitments, revolving lines of credit and standby letters of credit should be measured at fair value? The Board decided that an entity would measure loan commitments, revolving lines of credit, and standby letters of credit at fair value if its business strategy for the underlying loans is to hold them for sale ; changes in fair value would be recognized in net income. 4. If a commitment should not be recognized at fair value, how should an entity account for any commitment fees received? An entity would recognize any fees received in accordance with the existing guidance in FASB Accounting Standards Codification ® Subtopic 310-20. Under that guidance, if the likelihood is that exercise of the commitment is remote, any commitment fees received would be recognized as fee income over the commitment period. If the likelihood is that exercise is not remote, any commitment fees received would be deferred and recognized over the life of the funded loan as an adjustment of yield. International Convergence 1. What does the phrase “international convergence of accounting standards” refer to? The phrase international convergence of accounting standards refers to both a goal and the path taken to reach it. The FASB believes that the ultimate goal of convergence is a single set of high- quality, international accounting standards that companies worldwide would use for both domestic and cross-border financial reporting. 1
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Today, the path toward that goal is the collaborative efforts of the FASB and the International Accounting Standards Board ( IASB ) to both improve U.S. generally accepted accounting principles (U. S. GAAP) and International Financial Reporting Standards (IFRS) and eliminate the differences between them . 2. What drives the demand for international convergence? Investors’ desire for high-quality, internationally comparable financial information that is useful for decision-making in our increasingly global capital markets. 3.
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AC 300_FASB_WEBSITE EXERCISES - Class Participation...

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