ACCO.721<br /> <br />FASB 107-115<br /> <br />DATE: 11/04/09<br /> <br />JOSE CINTRON,MBA<br />
FASB “ROCKS” the Accounting World!!<br />With Fair Value Accounting <br />for Financial Instruments<br />
There was an Investment Community Interest in Reporting  Fair Values of Financial Instruments in Financial Statements.<br />
     The Life Of An Accountant Before 1993<br /><ul><li> Objective
 Conservative
 Simple to </li></ul>explain<br />Hmmm...<br />Historical Cost…<br />Lower of Cost or Market…<br />Life is good...<br />FA...
LOCOM Valuation Adjustments<br />Net Income Trends<br /><ul><li> Irregular earnings patterns
 Not consistent with realization principle
 Cumbersome Disclosure (FASB 107) </li></ul> Everything  was not perfect. Accountant Before 1993<br />
We need FASB #115 <br />              Current Fair Value Reporting: FASB#107 (1991)<br /><ul><li>Is cumbersome, inconsiste...
Does not permit analysts to gauge value and risk
Does not disclose assumptions for gain on sale computations</li></ul>Accountant<br />
1993<br />FASB Statement No. 115 Accounting for Certain Investments in Debt and Equity Securities<br />
Keep valuation adjustments on the balance sheet until <br />they are earned!<br />Three Categories:<br />Trading securitie...
Securities that will be held for a short period of time for trading purposes.  <br />Debt securities the company has the p...
FASB 115<br />Market Value = Fair Value<br /><ul><li>F.V. of Trading Securities - Income Statement.
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FASB 12, FASB 107, FASB 115, Fair Value,Trading Securities,Maturity

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Fasb 12,fasb 107, fasb 115,current fair value reporting,trading securities,help to maturity,available for sale, jose cintron, advance business consulting, http://mba4help.com, jose cintron

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FASB 12, FASB 107, FASB 115, Fair Value,Trading Securities,Maturity

  1. 1. ACCO.721<br /> <br />FASB 107-115<br /> <br />DATE: 11/04/09<br /> <br />JOSE CINTRON,MBA<br />
  2. 2. FASB “ROCKS” the Accounting World!!<br />With Fair Value Accounting <br />for Financial Instruments<br />
  3. 3. There was an Investment Community Interest in Reporting Fair Values of Financial Instruments in Financial Statements.<br />
  4. 4. The Life Of An Accountant Before 1993<br /><ul><li> Objective
  5. 5. Conservative
  6. 6. Simple to </li></ul>explain<br />Hmmm...<br />Historical Cost…<br />Lower of Cost or Market…<br />Life is good...<br />FASB Statement No. 12, Accounting for Certain Marketable Securities<br />
  7. 7. LOCOM Valuation Adjustments<br />Net Income Trends<br /><ul><li> Irregular earnings patterns
  8. 8. Not consistent with realization principle
  9. 9. Cumbersome Disclosure (FASB 107) </li></ul> Everything was not perfect. Accountant Before 1993<br />
  10. 10. We need FASB #115 <br /> Current Fair Value Reporting: FASB#107 (1991)<br /><ul><li>Is cumbersome, inconsistent, and confusing
  11. 11. Does not permit analysts to gauge value and risk
  12. 12. Does not disclose assumptions for gain on sale computations</li></ul>Accountant<br />
  13. 13. 1993<br />FASB Statement No. 115 Accounting for Certain Investments in Debt and Equity Securities<br />
  14. 14. Keep valuation adjustments on the balance sheet until <br />they are earned!<br />Three Categories:<br />Trading securities<br />Hold to maturity<br />Available for sale<br /> Classify financial assets<br /> according to <br />management intention!<br />
  15. 15. Securities that will be held for a short period of time for trading purposes. <br />Debt securities the company has the positive intent and ability to hold until maturity. <br /> a) debt securities not classified as held to maturity and b) debt and equity securities that are not classified as trading securities are available for sale.<br />
  16. 16. FASB 115<br />Market Value = Fair Value<br /><ul><li>F.V. of Trading Securities - Income Statement.
  17. 17. Held to Maturity – Not recognized / P.I.
  18. 18. F. V. of AFS Securities – SH.Equity Section</li></li></ul><li>Balance Sheet (AFS)<br />ASSETS<br />LIABILITIES<br />EQUITY<br />Adjustment to:<br />Unrialized gain/ losses on investments from FV. <br />Shareholder’s Equity seccion.<br />
  19. 19. FASB 115,Securities with fair market value below cost basis are impairer.<br />If impairment is determined to be other than temporary, cost basis of individual security must be written down to fair value through income statements.<br />
  20. 20. Fannie Mae and Freddie Mac(2008) significant decline in market price of their stock, these securities are presumed to have other-than-temporary impairment losses if their cost basis is well in excess of current market prices.<br /><ul><li>These losses are considered realized and must be recognized in the income statement.
  21. 21. Losses are capital losses for tax purposes.</li></li></ul><li> The Life Of An Accountant after the Year 1993<br /><ul><li> More accurate valuation
  22. 22. More difficult to determine
  23. 23. More difficult to explain</li></ul>Jose,Hmmm…<br />Fair Value Accounting…<br />Equity Adjustments…<br />Change is hard...<br />
  24. 24. “Change is hard, Jose.”<br />FASB no.115, is here to stay. You will love no. 114<br />
  25. 25. REFERENCES<br />Summary of Statement No. 115,retrieved on Nov.4, 2009 from;<br />http://www.fasb.org/summary/stsum115.shtml<br />Financial Accounting Standard Board,retrieved on Nov.4, 2009 from;<br />http://www.fasb.org/jsp/FASB/Page/03-16-09_otti.pdf<br />FASB 115: it's back to the future 115,retrieved on Nov.4, 2009 from;<br />http://www.thefreelibrary.com/FASB+115:+it's+back+to+the+future+for+market+value+accounting.-a014381134<br />Summary of Statement No. 107, retrieved on Nov.4, 2009 from;<br />http://www.fasb.org/pdf/fas107.pdf<br />

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