Disclosure and Glossary
Total Page:16
File Type:pdf, Size:1020Kb
Load more
Recommended publications
-
3.5 FINANCIAL ASSETS and LIABILITIES Definitions 1. Financial Assets Include Cash, Equity Instruments of Other Entities
128 SU 3: Financial Accounting I 3.5 FINANCIAL ASSETS AND LIABILITIES Definitions 1. Financial assets include cash, equity instruments of other entities (e.g., preference shares), contract rights to receive cash or other financial assets from other entities (e.g., accounts receivable), etc. 2. Financial liabilities include obligations to deliver cash or another financial asset (e.g., bonds or accounts payable), obligations to exchange financial instruments under potentially unfavorable conditions (e.g., written options), etc. Initial Recognition 3. A financial asset or liability is initially recognized only when the entity is a party to the contract. Thus, contract rights and obligations under derivatives are recognized as assets and liabilities, respectively. a. A firm commitment to buy or sell goods or services ordinarily does not result in recognition until at least one party has performed. 1) However, certain contracts to buy or sell a nonfinancial item may result in recognition of an asset or liability. a) For example, a firm commitment to buy a commodity in the future that (1) can be settled in cash and (2) is not held for the purpose of receiving the commodity is treated as a financial instrument. Accordingly, its net fair value is recognized at the commitment date. b) If an unrecognized firm commitment is hedged in a fair value hedge,a change in its net fair value related to the hedged risk is recognized as an asset or liability. 4. An issuer of a financial guarantee initially recognizes a liability and measures it at fair value. Subsequent measurement is at the greater of (a) the amount based on accounting for provisions or (b) the amortized amount. -
Distinguishing Between Securities Account and Deposit Accounts Under the UCC
As Appeared in the Illinois Bar Journal December, 2000, Volume 88 #12 Distinguishing Between Securities Account and Deposit Accounts Under the UCC By René Ghadimi, Katten Muchin Zavis Rosenman ©Reprinted with permission of the Illinois Bar Journal. Copyright by the Illinois State Bar Association, on the Web at <www.isba.org> Lenders frequently take security interests in the deposit accounts and securities accounts of their borrowers to secure the repayment of borrowers loan obligations. This article explores the basis for perfecting security interests in securities and deposit accounts and discusses the often important and sometimes elusive distinction between the two. The first step [in] determining how to perfect a lien is to decide whether a given account is a deposit or a securities account, as such terms are defined in the UCC in the relevant jurisdiction. Cash collateral accounts of one form or another are an important part of many finance transactions. These accounts may constitute significant assets of a borrower and can assume many forms, including operating accounts, capital subscription accounts, various types of reserve accounts and cash management accounts. These accounts may contain funds that are maintained overnight or for extended periods. More often than not, business realities dictate that the borrower be allowed to maintain some degree of control over the funds and invest them in financial assets rather than letting them languish as cash balances. The question for lenders who typically take a pledge of these accounts to secure the loan obligations of their borrower is how to perfect their security interest. These lenders must confront the issue of whether these various accounts are deposit accounts or securities accounts under the Uniform Commercial Code, or maybe a little of both. -
IFRS 9, Financial Instruments Understanding the Basics Introduction
www.pwc.com/ifrs9 IFRS 9, Financial Instruments Understanding the basics Introduction Revenue isn’t the only new IFRS to worry about for 2018—there is IFRS 9, Financial Instruments, to consider as well. Contrary to widespread belief, IFRS 9 affects more than just financial institutions. Any entity could have significant changes to its financial reporting as the result of this standard. That is certain to be the case for those with long-term loans, equity investments, or any non- vanilla financial assets. It might even be the case for those only holding short- term receivables. It all depends. Possible consequences of IFRS 9 include: • More income statement volatility. IFRS 9 raises the risk that more assets will have to be measured at fair value with changes in fair value recognized in profit and loss as they arise. • Earlier recognition of impairment losses on receivables and loans, including trade receivables. Entities will have to start providing for possible future credit losses in the very first reporting period a loan goes on the books – even if it is highly likely that the asset will be fully collectible. • Significant new disclosure requirements—the more significantly impacted may need new systems and processes to collect the necessary data. IFRS 9 also includes significant new hedging requirements, which we address in a separate publication – Practical guide – General hedge accounting. With careful planning, the changes that IFRS 9 introduces might provide a great opportunity for balance sheet optimization, or enhanced efficiency of the reporting process and cost savings. Left too long, they could lead to some nasty surprises. -
The Socialization of Investment, from Keynes to Minsky and Beyond
Working Paper No. 822 The Socialization of Investment, from Keynes to Minsky and Beyond by Riccardo Bellofiore* University of Bergamo December 2014 * [email protected] This paper was prepared for the project “Financing Innovation: An Application of a Keynes-Schumpeter- Minsky Synthesis,” funded in part by the Institute for New Economic Thinking, INET grant no. IN012-00036, administered through the Levy Economics Institute of Bard College. Co-principal investigators: Mariana Mazzucato (Science Policy Research Unit, University of Sussex) and L. Randall Wray (Levy Institute). The author thanks INET and the Levy Institute for support of this research. The Levy Economics Institute Working Paper Collection presents research in progress by Levy Institute scholars and conference participants. The purpose of the series is to disseminate ideas to and elicit comments from academics and professionals. Levy Economics Institute of Bard College, founded in 1986, is a nonprofit, nonpartisan, independently funded research organization devoted to public service. Through scholarship and economic research it generates viable, effective public policy responses to important economic problems that profoundly affect the quality of life in the United States and abroad. Levy Economics Institute P.O. Box 5000 Annandale-on-Hudson, NY 12504-5000 http://www.levyinstitute.org Copyright © Levy Economics Institute 2014 All rights reserved ISSN 1547-366X Abstract An understanding of, and an intervention into, the present capitalist reality requires that we put together the insights of Karl Marx on labor, as well as those of Hyman Minsky on finance. The best way to do this is within a longer-term perspective, looking at the different stages through which capitalism evolves. -
Accounting & Reporting of Financial Instruments 2016
Accounting & Reporting of Financial Instruments 2016 Illustration 1 (Exchange of Financial Liability at Unfavorable terms) A company borrowed `50 lacs @ 12% p.a. Tenure of the loan is 10 years. Interest is payable every year and the principal is repayable at the end of 10th year. The company defaulted in payment of interest for the year 4, 5 and 6. A loan reschedule agreement took place at the end of 7 year. As per the agreement the company is required to pay `90 lacs at the end of 8th year. Calculate the additional amount to be paid on account of rescheduling and also the book value of loan at the end of 8th year when reschedule agreement took place. Solution Assumption: Interest is compounded in case of default. Outstanding Amount at the end of 8th year = `50,00,000 x 1.12 x 1.12 x 1.12 x 1.12 x 1.12 = `88,11,708 (i.e. adding interest for 4th to 8th year) Rescheduled amount to be paid at the end of the 8th year = `90,00,000 Additional amount to be paid on rescheduling = `90,00,000 - `88,11,708 = `1,88,292. Illustration 2 Entity A holds an option to purchase equity shares in a listed entity B for `100 per share at the end of a 90 day period. Evaluate the contract whether a financial asset or a financial liability? What if the entity A has written the option? Solution The above call option gives entity A, a contractual right to exchange cash of `100 for an equity share in another entity and will be exercised if the market value of the share exceeds `100 at the end of the 90 day period. -
Investment Interests Safe Harbor (42 C.F.R
Investment Interests Safe Harbor (42 C.F.R. § 1001.952(a)) (a) As used in section 1128B of the Act, “remuneration” does not include any payment that is a return on an investment interest, such as a dividend or interest income, made to an investor as long as all of the applicable standards are met within one of the following three categories of entities: (1) If, within the previous fiscal year or previous 12 month period, the entity possesses more than $50,000,000 in undepreciated net tangible assets (based on the net acquisition cost of purchasing such assets from an unrelated entity) related to the furnishing of health care items and services, all of the following five standards must be met— (i) With respect to an investment interest that is an equity security, the equity security must be registered with the Securities and Exchange Commission under 15 U.S.C. 781 (b) or (g). (ii) The investment interest of an investor in a position to make or influence referrals to, furnish items or services to, or otherwise generate business for the entity must be obtained on terms (including any direct or indirect transferability restrictions) and at a price equally available to the public when trading on a registered securities exchange, such as the New York Stock Exchange or the American Stock Exchange, or in accordance with the National Association of Securities Dealers Automated Quotation System. (iii) The entity or any investor must not market or furnish the entity's items or services (or those of another entity as part of a cross referral agreement) to passive investors differently than to non-investors. -
Frs139-Guide.Pdf
The KPMG Guide: FRS 139, Financial Instruments: Recognition and Measurement i Contents Introduction 1 Executive summary 2 1. Scope of FRS 139 1.1 Financial instruments outside the scope of FRS 139 3 1.2 Definitions 3 2. Classifications and their accounting treatments 2.1 Designation on initial recognition and subsequently 5 2.2 Accounting treatments applicable to each class 5 2.3 Financial instruments at “fair value through profit or loss” 5 2.4 “Held to maturity” investments 6 2.5 “Loans and receivables” 7 2.6 “Available for sale” 8 3. Other recognition and measurement issues 3.1 Initial recognition 9 3.2 Fair value 9 3.3 Impairment of financial assets 10 4. Derecognition 4.1 Derecognition of financial assets 11 4.2 Transfer of a financial asset 11 4.3 Evaluation of risks and rewards 12 4.4 Derecognition of financial liabilities 13 5. Embedded derivatives 5.1 When to separate embedded derivatives from host contracts 14 5.2 Foreign currency embedded derivatives 15 5.3 Accounting for separable embedded derivatives 16 5.4 Accounting for more than one embedded derivative 16 6. Hedge accounting 17 7. Transitional provisions 19 8. Action to be taken in the first year of adoption 20 Appendices 1: Accounting treatment required for financial instruments under their required or chosen classification 21 2: Derecognition of a financial asset 24 3: Financial Reporting Standards and accounting pronouncements 25 1 The KPMG Guide: FRS 139, Financial Instruments: Recognition and Measurement Introduction This KPMG Guide introduces the requirements of the new FRS 139, Financial Instruments: Recognition and Measurement. -
15 Theories of Investment Expenditures
Economics 314 Coursebook, 2010 Jeffrey Parker 15 THEORIES OF INVESTMENT EXPENDITURES Chapter 15 Contents A. Topics and Tools ..............................................................................2 B. How Firms Invest ............................................................................2 What investment is and what it is not ............................................................................ 2 Financing of investment ................................................................................................ 3 The Modigliani-Miller theorem ..................................................................................... 5 Sources of finance and credit availability effects ............................................................... 6 C. Investment and the Business Cycle ...................................................... 8 Keynes and the business cycle ........................................................................................ 8 The accelerator theory of investment ............................................................................... 9 The multiplier-accelerator model .................................................................................. 10 D. Understanding Romer’s Chapter 8 ..................................................... 12 The firm’s profit function ............................................................................................ 13 User cost of capital ..................................................................................................... -
The Flexible Accelerator Model of Investment: an Application to Ugandan Tea-Processing Firms
African Journal of Agricultural and Resource Economics Volume 10 Number 1 pages 1-15 The flexible accelerator model of investment: An application to Ugandan tea-processing firms *Edgar E. Twine International Livestock Research Institute, c/o IITA East Africa Hub, Dar es Salaam, Tanzania. E-mail: [email protected] Barnabas Kiiza Makerere University, Kampala, Uganda. E-mail: [email protected] Bernard Bashaasha Makerere University, Kampala, Uganda. E-mail: [email protected] Abstract The study uses the flexible accelerator model to examine determinants of the level and growth of investment in machinery and equipment for a sample of tea-processing firms in Uganda. Using a dynamic panel data model, we find that, in the long run, the level of investment in machinery and equipment is positively influenced by the accelerator, firm-level liquidity, and a favourable investment climate in the country. Depreciation of the exchange rate negatively affects investment. We conclude that firm-level strategies that increase output and profitability, and a favourable investment policy climate, are imperative to the growth of the tea industry. Key words: accelerator model; fixed asset investments; Ugandan tea-processing firms 1. Introduction Investment or capital accumulation is widely regarded as important in raising output and income at both the firm and national level. The private sector in Uganda has responded to macroeconomic policy reforms with private investment increasing by 13% per year on average from 1986/1987 to 1997/1998 (Collier & Reinikka 2001). The sectors that have attracted most investment in recent years are manufacturing, agriculture, forestry, fishing, construction and services. -
How Do Central Banks Invest? Embracing Risk in Official Reserves
How do Central Banks Invest? Embracing Risk in Official Reserves Elliot Hentov, PhD, Head of Policy and Research, Official Institutions Group, State Street Global Advisors Alexander Petrov, Senior Strategist, Official Institutions Group, State Street Global Advisors Danae Kyriakopoulou, Chief Economist and Director of Research, OMFIF Pierre Ortlieb, Economist, OMFIF How do Central Banks Invest? Embracing Risk in Official Reserves This is an update to the 2017 SSGA study of central bank asset allocation.1 In contrast to the last study which focused on the allocation of excess reserves (i.e. the investment tranche) exclusively, this study reviews the entire reserve portfolio. Two years on, the main findings are: • Overall, there is greater diversity of asset • Central banks hold around $800bn (6% of classes and a broader use of risk assets, portfolio) in equities and over one trillion with roughly 15% ($2tn out of total $13tn) (9% of portfolio) in return-enhancing2 bonds in unconventional reserve instruments. (mainly investment-grade corporates and • Based on official reserves, central banks asset-backed securities) compared with are significant, frequently dominant, close to zero at the beginning of the century. capital markets participants: they hold about a third of all supranational debt and nearly a fifth of high-grade sovereign debt (or nearly half if domestic QE holdings are added). Central Banks as Asset Owners In December 2017, total global central bank reserves5 stood at around $13.3tn, recovering from their end- After a decade of unconventional monetary policy, one 2015 trough but below the mid-2014 peak of over could be forgiven for confusion around central bank $13.6tn (see Figure 1). -
Section 3856 - Financial Instruments December 2014
ASPE AT A GLANCE Section 3856 - Financial Instruments December 2014 Section 3856 – Financial Instruments Effective Date Fiscal years beginning on or after January 1, 20111 SCOPE COMMON FINANCIAL INSTRUMENTS Applies to all financial instruments except for the following: • Interests in subsidiaries, entities subject to significant influence, and joint arrangements that are accounted for in accordance with Section 1591, Subsidiaries, Section • Cash; 3051, Investments, Section 3056, Interests in Joint Arrangements; however, this Section does apply to a derivative that is based on such an interest. • Demand and fixed-term deposits; • Leases (see Section 3065, Leases), although Appendix B of this Section applies to transfers of lease receivables. • Commercial paper, bankers’ • Employer's rights and obligations for employee future benefits and related plan assets (see Section 3462, Employee Future Benefits). acceptances, treasury notes and • Insurance contracts, including the cash surrender value of a life insurance policy. bills; • Investments held by an investment company that are accounted for at fair value in accordance with AcG-18, Investment Companies; however, the disclosure requirements • Accounts, notes and loans in paragraphs 3856.37-.54 apply to an investment company. receivable and payable; • Contracts and obligations for stock-based compensation to employees and stock-based payments to non-employees (see Section 3870, Stock-based Compensation and • Bonds and similar debt Other Stock-based Payments). instruments, both issued and held • Guarantees, other than guarantees that replace financial liabilities as described in paragraph 3856.A58 (see also AcG-14, Disclosure of Guarantees). as investments; • Contracts based on revenues of a party to the contract. • Common and preferred shares • Loan commitments (see Section 3280, Contractual Obligations, and Section 3290, Contingencies). -
Saving, Investment, and the Financial System
LECTURE NOTES ON MACROECONOMIC PRINCIPLES Peter Ireland Department of Economics Boston College [email protected] http://www2.bc.edu/peter-ireland/ec132.html Copyright (c) 2013 by Peter Ireland. Redistribution is permitted for educational and research purposes, so long as no changes are made. All copies must be provided free of charge and must include this copyright notice. Ch 26 Saving, Investment, and the Introduction When Financial a country saves System a large fraction of its income, more resources are available for investment in capital, and higher capital raises the economy’s productivity, raising living standards still further. But within that country, at any given point in time, some people will want to save some of their income for the future, while others will want to borrow to finance investments in physical capital. How are savers and investors coordinated? The financial system consists of those institutions in my the econo that help to match ’s one person savings with another person’s investment. This chapter: 1. Describes the variety of ns institutio that make up the financial system in the US today. 2. Describes the relationship between the financial system and these key macroeconomic variables: saving and investment. 3. Develops a model that describes how the interest rate adjusts mand so as to equate the de for and supply of funds in the financial system and uses this model to show how various government policies affect the interest rate, saving, and investment. Outline 1. Financial Institutions in the US Economy A. Financial Markets i. Bond Market ii. Stock Market B.