Chapter 11 - Solution Manual

That cost should be accounted for by the parent

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include the amount paid at settlement plus (minus) the parent's gain (loss) on the derivative instrument. That cost should be accounted for by the parent entity as a step acquisition in accordance with paragraphs 805-10-25-9 through 25-10. If the parent entity ultimately delivers shares of the consolidated subsidiary as part of net share or physical settlement, a gain or loss should be recognized in accordance with paragraph 323-10-35-35. In determining the amount of gain or loss recognized under that paragraph, the asset or liability balance of the derivative instrument at the settlement date should be reflected as a decrease or an increase, respectively, in the selling price of the shares delivered. Implementation Guidance 55-1 This Section provides guidance on the following implementation matters: a. Determining whether a contract is within the scope of this Subtopic b. Unit of accounting—a transferable option is considered freestanding, not embedded c. Definition of derivative instrument d. Instruments not within scope e. Scope application to certain contracts f. Other presentation matters g. Synthetic guaranteed investment contracts h. Certain contracts on a consolidated subsidiary’s equity. Some examples of the EITF pronouncements addressing derivatives are: 815-10-15-141 [The guidance in the Certain Contracts on Debt and Equity Securities Subsections applies only to those forward contracts and purchased options having all of the following characteristics: [EITF 96-11, paragraph ISSUE, sequence 13.1.1] ] a. [The contract is entered into to purchase securities that will be accounted for under Topic 320. [EITF 96-11, paragraph DISCUSSION, sequence 15.1.2.2.1] ] b. [The contract's terms require physical settlement of the contract by delivery of the securities. [EITF 96-11, paragraph ISSUE, sequence 13.1.2] ] c. [The contract is not a derivative instrument otherwise subject to this Subtopic. [EITF 96-11, paragraph STATUS, sequence 23.1.1] ] d. [The contract, if a purchased option, has no intrinsic value at acquisition. [EITF 96-11, paragraph DISCUSSION, sequence 15.1.2.1] ] 815-10-15-142 [The guidance in the Certain Contracts on Debt and Equity Securities Subsections does not apply to contracts involving securities not within the scope of Topic 320. [EITF 96-11, paragraph STATUS, sequence 23.2] ] FASB ASC 11-4 The Fair Value Option and Health Care Businesses
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249 Search fair value option and not-for-profit 825-10-15-7 15-7 Not-for-profit entities (NFPs) shall apply the provisions of the Fair Value Option Subsections with the following modifications: a. References to an income statement shall be replaced with references to a statement of activities, statement of changes in net assets, or statement of operations. b. References to earnings shall be replaced with references to changes in net assets, except as indicated in (c). c. aragraph 954-825-45-1 explains that health care entities subject to Topic 954 shall report unrealized gains and losses on items for which the fair value option has been elected within the performance indicator or as a part of discontinued operations, as appropriate. Unlike other NFPs, health care entities subject to that Topic present performance indicators analogous to income from continuing operations. Consistent with the provisions of Subtopic 958-10, NFPs may
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