財務(wù)會計理論(司可脫)文件07_scott_im_ch07

1、Chapter 7Measurement Perspective Applications1Measurement Perspective ExamplesAccounts Receivable and PayableCapital LeasesLower-of-Cost-or-Market RuleInventoriesTemporary investmentsN.B. No subsequent writeup if market value improvespartial application2Examples, Contd.Ceiling Tests2-stage procedure

2、Impaired?If so, write down to fair value No subsequent writeup if asset value improvespartial applicationPost-Employment BenefitsExpected present value of benefits earnedExpense reduced by earnings on plan assetsReliability of estimates?Choice of discount rate3Examples, Contd.Impaired LoansWrite dow

3、n to estimated realizable valueDiscounted at interest rate implicit in the loan transactionAn extension of measurement perspective, since may write loan value up if its fair value improves4Financial Instruments5DefinitionA Financial Instrument isA contractCash, or a contractual right to receive/deli

4、ver cash or another financial instrumentNote Broad DefinitionCash, receivables, payables, marketable securities,.6SFAS 115 (and Section 3855, CICA Handbook)Applies to Debt & Equity SecuritiesClassified at acquisition into one of 3 categoriesHeld-to-maturityValued on cost basisTradingValued at fair v

5、alueAvailable-for-saleValued at fair value7SFAS 115 (and Section 3855, CICA Handbook), Contd.Why the 3 Categories?Core deposit intangiblesInability to value reliably precludes including financial liabilities in scope of SFAS 115 (Section 3855 includes some)Gains tradingFair value accounting makes ga

6、ins trading more difficult for trading and available-for-sale securities Elaborate precautions to prevent gains trading for held-to-maturity securitiesEarnings volatility Reduced by including unrealized gains on available-for-sale securities in other comprehensive income (OCI)8Derivative Financial I

7、nstrumentsDefinition of Financial Instruments Includes DerivativesDefinition of DerivativesA contract, the value of which depends on some underlyingMay not require an initial cash outlayGenerally settled in cash, not in kind9 SFAS 133 (and Section 3865, CICA Handbook)Fair Value HedgesGains and losse

8、s on the hedging instrument included in net incomeFair valuing the hedged item may offsetCash Flow HedgesGains and losses on the hedging instrument included in OCI, until the future transaction affects net income10SFAS 133 (and Section 3865, CICA Handbook), contd.Benefits of Hedge AccountingReduces

9、earnings volatilityOffset gains/losses by fair valuing hedged item (fair value hedge)Delay gain/loss recognition by including in OCI until realizedHedging may avoid the ceiling test11SFAS 133 (and Section 3865, CICA Handbook), contd.To Obtain Benefits of Hedge AccountingHedges Must QualifyMust be hi

10、ghly effectiveNegative correlation with hedged itemHedges Must be DesignatedRequires elaborate procedure and documentation12Accounting for IntangiblesPurchased IntangiblesGoodwill arising from an acquisitionAccounted for at costNo amortizationSubject to ceiling testCan lead to major writedowns, e.g.

11、, JDS Uniphase, 2001 Annual Report. See Problem 9.7Management devices to work around goodwill and related writedowns13Accounting for Intangibles, ContdSelf-Developed IntangiblesSelf-developed goodwill, e.g., from R&DHard to reliably determine fair valueCosts written off as incurredRecognition lag: g

12、oodwill value shows up over time on income statementRecognition lag responsible for low ability of net income to explain stock returns?Lev & Zarowin (1999) argue yes14 Lev & Zarowin, “The Boundaries of Financial ReportingTheir Study Documents a Decreasing Usefulness Earnings InformationUsefulness ev

13、aluated by ability of earnings to explain abnormal share returnLow R2 And falling?Low ERCsEspecially for research-intensive firms15Lev & Zarowin, ContdConclusionAccounting for intangibles is inadequate16Lev & Zarowin, ContdSuggestion to Improve UsefulnessCapitalize successful intangibles after a “tr

14、igger point is attainedAmortize over useful lifeLike SE in oil and gas accountingAmounts capitalized and amortized may reveal inside information, since it is management that has best knowledge of R&D value17Risk ManagementRisk Controlled by Natural Hedging + Hedging with DerivativesHedging v. Specul

15、ationA fine line separates the two18Reporting on riskBeta RiskRelevant to rational, diversified investorAccounting variables correlated with betaBeaver, Kettler, and Scholes (1970)Reasons Why Other Risks Also RelevantInvestors may not act according to rational decision theory modelRisk information m

16、ay reduce estimation riskRisk reporting may control speculation19A Measurement Perspective on Risk ReportingNarrative, in MD&ASensitivities AnalysisSuncor Energy Inc., 2003 Annual ReportValue at RiskMicrosoft Corp., 2004 Annual Report20Sensitivities Analysis, Suncor Energy Inc.2003 Annual ReportSee Table 7.2Problems of sensitivities analysisNet of Hedging?Linearity Assumption - Relevant RangeCo-movements (i.e., correlations) in prices21Value at Risk, Microsoft Corp.2004 Annual ReportDiscloses a 97.5% probability that a l