Problem 1
Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) have adopted the asset and liability view as the basis for their conceptual framework and approach to standard setting.
Required:
Contrast the asset-liability view with the revenue-expense view and explain the Boards' decision to grant conceptual primacy to the definitions of assets and liabilities.
Problem2
The Kissel Company (Kissel) acquires a machine in a business combination. The machine will be held and used in its operations. The machine was originally purchased by the acquired entity from an outside vendor and, before the business combination, was customised by the acquired entity for use in its operations. However, the customization of the machine was not extensive. Quoted prices for similar machines adjusted for differences as customized and very similar machines range from $40,000 to $48,000 with most of the quotes being toward the higher end of this range. These amounts reflect the price that would be received for the machine in its current condition (used) and location (installed and configured for use).
The machine does not have a separately identifiable income stream from which to develop reliable estimates of future cash flows. Furthermore, information about short-term and intermediate-term lease rates for similar used machinery that otherwise could be used to project an income stream (i.e., lease payments over remaining service lives) is not available.
Kissel's management estimates that the amount that would be required to currently construct a substitute (customized) machine of comparable utility would be in the range of $40,000 to $52,000. The estimate takes into account the condition of the machine and the environment in which it operates, including physical wear and tear (i.e., physical deterioration), improvements in technology (i.e., functional obsolescence), conditions external to the condition of the machine such as a decline in the market demand for similar machines (i.e., economic obsolescence) and installation costs.
Kissel's management determines that the asset would provide maximum value to market participants through its use in combination with other assets or with other assets and liabilities (as installed or otherwise configured for use). There is no evidence to suggest that there is an alternative use for the machine. Therefore, the highest and best use of the machine is its current use.
Required:
1. Describe valuation techniques (approaches) available under ASC 820?
2. Apply individual valuation techniques to determine fair value range for the machinery.
3. What would be the fair value of the machinery using multiple-valuation techniques? Support your judgment.
Problem 3
Your client took accounting courses a number of years ago and was unaware of recent changes to comprehensive income reporting.
Required:
Access the FASB Codification to conduct research using the Codification Research System to prepare responses to the following items. Use various tools, such as Master Glossary and Cross Reference function, to answer the questions below. Provide full Codification references for your responses.
(1) What authoritative literature addresses comprehensive income? What is the predecessorstandard for the topic you selected?
(2) Provide the definition of comprehensive income.
(3) How the comprehensive income should be reported? Provide details about each allowed format
(4) Define classification within other comprehensive income; provide a list of items required to be reported as other comprehensive income.