财务会计理论(司可脱)ppt文件07_scott_im_ch07

2006 Pearson Education Canada Inc.,7-1,Chapter 7Measurement Perspective Applications, 2006 Pearson Education Canada Inc.,7-2,Measurement Perspective Examples,Accounts Receivable and PayableCapital LeasesLower-of-Cost-or-Market RuleInventoriesTemporary investmentsN.B. No subsequent writeup if market value improvespartial application, 2006 Pearson Education Canada Inc.,7-3,Examples, Contd.,Ceiling Tests2-stage procedureImpaired?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 rate, 2006 Pearson Education Canada Inc.,7-4,Examples, Contd.,Impaired LoansWrite down 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 improves, 2006 Pearson Education Canada Inc.,7-5,Financial Instruments, 2006 Pearson Education Canada Inc.,7-6,Definition,A Financial Instrument isA contractCash, or a contractual right to receive/deliver cash or another financial instrumentNote Broad DefinitionCash, receivables, payables, marketable securities,., 2006 Pearson Education Canada Inc.,7-7,SFAS 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 valueAvailable-for-saleValued at fair value, 2006 Pearson Education Canada Inc.,7-8,SFAS 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 gains 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), 2006 Pearson Education Canada Inc.,7-9,Derivative Financial Instruments,Definition 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 kind, 2006 Pearson Education Canada Inc.,7-10,SFAS 133 (and Section 3865, CICA Handbook),Fair Value HedgesGains and losses 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 income, 2006 Pearson Education Canada Inc.,7-11,SFAS 133 (and Section 3865, CICA Handbook), contd.,Benefits of Hedge AccountingReduces 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 test, 2006 Pearson Education Canada Inc.,7-12,SFAS 133 (and Section 3865, CICA Handbook), contd.,To Obtain Benefits of Hedge AccountingHedges Must QualifyMust be highly effectiveNegative correlation with hedged itemHedges Must be DesignatedRequires elaborate procedure and documentation, 2006 Pearson Education Canada Inc.,7-13,Accounting for Intangibles,Purchased IntangiblesGoodwill arising from an acquisitionAccounted for at costNo amortizationSubject to ceiling testCan lead to major writedowns, e.g., JDS Uniphase, 2001 Annual Report. See Problem 9.7Management devices to work around goodwill and related writedowns“Pro-forma income,” e.g., TD Bank, 2000 Annual Report. See practice and theory vignette, Section 7.4.2, 2006 Pearson Education Canada Inc.,7-14,Accounting for Intangibles, Contd,Self-Developed IntangiblesSelf-developed goodwill, e.g., from R&DHard to reliably determine fair valueCosts written off as incurredRecognition lag: goodwill value shows up over time on income statementRecognition lag responsible for low ability of net income to explain stock returns?Lev & Zarowin (1999) argue yes, 2006 Pearson Education Canada Inc.,7-15,Lev & Zarowin, “The Boundaries of Financial Reporting”,Their Study Documents a Decreasing Usefulness Earnings InformationUsefulness evaluated by ability of earnings to explain abnormal share returnLow R2 And falling?Low ERCsEspecially for research-intensive firms, 2006 Pearson Education Canada Inc.,7-16,Lev & Zarowin, Contd,ConclusionAccounting for intangibles is inadequate, 2006 Pearson Education Canada Inc.,7-17,Lev & Zarowin, Contd,Suggestion to Improve UsefulnessCapitalize successful intangibles after a “trigger 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 value, 2006 Pearson Education Canada Inc.,7-18,Risk Management,Risk Controlled by Natural Hedging + Hedging with DerivativesHedging v. SpeculationA fine line separates the two, 2006 Pearson Education Canada Inc.,7-19,Reporting on risk,Beta 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 may reduce estimation riskRisk reporting may control speculation, 2006 Pearson Education Canada Inc.,7-20,A Measurement Perspective on Risk Reporting,Narrative, in MD&ACanadian Tire Corp. Text, Section 4.8.2Sensitivities AnalysisSuncor Energy Inc., 2003 Annual ReportValue at RiskMicrosoft Corp., 2004 Annual Report, 20