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Question;60. Held-to-maturity securities are equity securities that management intends and has the ability to hold to maturity.61. Held-to-maturity securities are always classified as non-current assets.62. Investment securities should always be reported at lower-of-cost-or-market.63. When a security is reclassified from Available-for-Sale to Trading, it is transferred at fair market value and any unrealized gains and losses must be recognized in the income statement.64. The Equity Conformity Rule requires that marketable securities must be marked to market for tax purposes.65. The equity method of accounting for investments should be used when the company has a controlling interest in the investee.66. All derivatives are recorded at market value on the balance sheet.67. If a company acquires 100% of another company using its stock, they must use pooling-of-interests accounting.68. Purchase accounting will normally result in lower asset turnover than pooling-of-interests.69. Purchase accounting is less commonly used for acquisitions than pooling-of interest accounting.70. When purchase accounting is used for acquisitions, prior year financial statements presented for comparative purposes should be restated as if the companies had always been combined.71. When a company acquires another company and purchase accounting is used, net income is usually lower than that in case of pooling-of-interests, because the cost of goods may be higher as inventory is recorded at market value (besides other reasons).72. Goodwill recorded as the result of an acquisition is defined as the purchase price less the book value of net assets.73. When a company with a higher price-earnings (P/E) ratio acquires a company with a lower P/E ratio in a stock-for-stock transaction accounted for as a pooling-of-interests, the earnings per share of the acquiring company will increase.74. When a company acquires another company and pooling-of-interest accounting is used, the statement of cash flows (after acquisition) will show a cash outflow in the investing section equal to the book value of the acquired company.75. The current rate method should be used to translate foreign currency into the parent currency when the functional currency is deemed to be the parent currency.76. When using the current rate method to record foreign subsidiary results, all assets and liabilities are translated at a rate, in effect as of the statement date.TRUE77. One of the problems with pooling-of-interests accounting is that it results, more often than not, in an understatement of assets.78. One of the problems with pooling-of-interests accounting is that the true cost of an acquisition is not reflected in the balance sheet of the acquirer.79. One of the problems with purchase accounting is that there is often very little basis for comparability of financial statements before acquisition and after acquisition.80. One of the problems with consolidated financial statements is that all intercompany transactions are not reported.81. Translation is the process under which local currency results are translated into the functional currency.82. When using the current rate method to record foreign subsidiary results, gains and losses arising from the translation process are reported separately as a component of stockholders' equity and excluded from reported net income.83. If the functional currency of a foreign-based subsidiary of an American company is the local currency, the current rate method of translation should be used for consolidation purposes.84. Reported sales in US dollars of revenues from a foreign subsidiary will be the same regardless of the functional currency.85. If a company has a wholly owned foreign subsidiary located at a place where the functional currency is highly inflationary, they should use the temporal method.86. When the income statement of a foreign subsidiary is translated into the reporting currency from the functional currency, the gross margin will remain the same in the translation process.87. If the temporal method is used for foreign currency translation and the foreign subsidiary has an excess of monetary liabilities over monetary assets, an increase in the strength of the dollar will result in a translation loss.88. If the temporal method is used for foreign currency translation and the foreign subsidiary has an excess of monetary assets over monetary liabilities, an increase in the strength of the dollar will result in a translation loss.89. Under SFAS 141, accounting for acquisitions can no longer result in an increase in the consolidated entity's stockholders' equity.90. Current GAAP requires that only goodwill for acquisitions completed prior to the elimination of pooling-of-interests in merger accounting be amortized.91. SFAS 142 requires that goodwill be tested using a two-step process as often as financial statements are presented.92. SFAS 159 allows companies to selectively report held-to-maturity and available-for-sale securities at fair value.93. SFAS 159 requires that once fair value has been adopted for a class of securities, the company can reverse the option after one year.94. If a company chooses the fair value option for an asset or liability, all changes in the fair value of the asset (or liability), including unrealized gain and losses, will be included in net income.TRUE

 

Paper#49107 | Written in 18-Jul-2015

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