Chapter 11 - Solution Manual

Paragraph 79 explains that leases subject to that

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a lease that should be accounted for in accordance with Topic 840. (Paragraph 815-10-15-79 explains that leases subject to that Topic are not subject to this Subtopic.) 55-61[Paragraph not used] > > Other Presentation Matters > > > Income Statement Presentation of Realized Gains And Losses 55-62Determining whether realized gains and losses on physically settled derivative instruments not held for trading purposes should be reported in the income statement on a gross or net basis is a matter of judgment that depends on the relevant facts and circumstances. Consideration of the facts and circumstances should be made in the context of the various activities of the entity rather than based solely on the terms of the individual contracts. In evaluating the facts and circumstances for purposes of determining whether an arrangement should be reported on a gross or net basis, all of the following may be considered: a. The economic substance of the transaction b. The guidance set forth in Topic 845 relative to nonmonetary exchanges c. The gross vs. net reporting indicators provided in Subtopic 605-45. > > Synthetic Guaranteed Investment Contracts 55-63From the perspective of the issuer of the contract, synthetic guaranteed investment contracts are derivative instruments as defined in this Subtopic. Synthetic guaranteed investment contracts contain an underlying, the formula by which interest is calculated, and a notional amount. The interplay between the fair value of a portfolio of segregated assets and a notional amount together determine the amount of the settlement(s), if any, due from the contract issuer, after considering all contract terms. Depending on the specifics of the contract, a synthetic guaranteed investment contract requires either no initial investment or the payment of a risk charge or fee (covering either the entire contract or, more typically, an initial period of the contract). The terms of a synthetic guaranteed investment contract require net settlement because the issuer of the contract makes a payment to the holder equal to the net amount due. For a background discussion of synthetic guaranteed investment contracts, including a comparison with traditional and benefit-responsive guaranteed investment contracts, see paragraph 815-10-05-8. Example 17 (see paragraph 815-10-55-169) illustrates contractual terms of a synthetic guaranteed investment contracts. > > Certain Contracts on a Consolidated Subsidiary’s Equity 55-64Paragraph 810-10-25-19 addresses freestanding derivative instruments entered into by a parent entity that are indexed to, and potentially settled in, the stock of a consolidated subsidiary and that are not within the scope of this Subtopic or Topic 480 (see paragraph 810-10-25-18). Transition Date: December 15, 2008 Transition Guidance: 815-10-65-4 [Paragraph not used] 55-65For derivative instruments indexed to, and potentially settled in, the stock of a consolidated subsidiary that are within the scope of this Subtopic, if the parent entity ultimately receives shares of the
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248 consolidated subsidiary in a net-share or physical settlement, the cost of acquiring those shares would include the amount paid at settlement plus (minus) the parent's gain (loss) on the derivative instrument.
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