كورس UNIT 3 : CMA PART 1
MR:amr taison
MR:mohamed cma
MR:desoky kh.
MR:m.batayneh
1) Overview
2) Measurement of an Investment in Equity Securities
3) Measurement Alternative for Investment in Equity Securities without a Readily Determinable Fair Value
4) Decision Tree: Classification and Measurement of an Investment in Equity Securities
MR:amr taison
MR:mohamed cma
MR:desoky kh.
MR:m.batayneh
1) Significant Influence
2) Application of the Equity Method
MR:amr taison
MR:mohamed cma
MR:desoky kh.
MR:m.batayneh
1) Overview
2) Held-to-Maturity Securities -- Amortized Cost
3) Trading Securities -- Fair Value through Net Income
4) Available-for-Sale Securities -- Fair Value through OCI
5) Impairment
6) Transfers between Categories
MR:amr taison
MR:mohamed cma
MR:desoky kh.
MR:m.batayneh
Contents
1) Overview
2) PPE -- Initial Measurement
3) PPE -- Measurement Subsequent to Initial Recognition
4) PPE -- Depreciation
5) Depreciation Methods
MR:amr taison
MR:mohamed cma
MR:desoky kh.
MR:m.batayneh
Contents
1) Initial Recognition
2) Intangible Assets with Finite Useful Lives
3) Intangible Assets with Indefinite Useful Lives
4) Goodwill
| G.2020 | G.2022 | mr.amro taison |
|---|---|---|
| 2.5 | 3.1 | lec. 6 |
| 2.6 | 3.2 | lec. 6 |
| 2.7 | 3.3 | lec. 6 |
| 3.1 | 3.4 | lec. 7 |
| 3.3 | 3.5 | lec. 7 |
1- What is the difference between shares and bonds?
1) shares
* the shares give its holder ownership right in the company
* The holder of common share has the right to vote to choose the management of the company, but bonds holder does not have the right to vote
*Note that preferred shares do not have voting right
* The share holder receives variable payments based on dividends and net income
2) Bonds
Bond: It is a debt owed by the company issuing the bond to the bond holder
* Bonds have the right of priority in case of liquidation or bankruptcy
* The bond holder receives fixed payments
* the shares give its holder ownership right in the company
* The holder of common share has the right to vote to choose the management of the company, but bonds holder does not have the right to vote
*Note that preferred shares do not have voting right
* The share holder receives variable payments based on dividends and net income
2) Bonds
Bond: It is a debt owed by the company issuing the bond to the bond holder
* Bonds have the right of priority in case of liquidation or bankruptcy
* The bond holder receives fixed payments
2- What are the types of bonds in terms of convertibility?
Convertibility means converting debt into equity in the company
1) Non-convertible bonds: These bonds do not have the right to convert, and are usually issued at a higher interest rate than convertible bonds
2) Partially convertible bonds: They are a type of debt (loans) that contain a portion that is determined when the debt is issued and that can be converted into shares.
3) Fully convertible bonds: They are bonds that have the right to convert into shares (equity) according to the conditions specified in the debt issuance
1) Non-convertible bonds: These bonds do not have the right to convert, and are usually issued at a higher interest rate than convertible bonds
2) Partially convertible bonds: They are a type of debt (loans) that contain a portion that is determined when the debt is issued and that can be converted into shares.
3) Fully convertible bonds: They are bonds that have the right to convert into shares (equity) according to the conditions specified in the debt issuance
3- What is the equity method used in measuring investment?
It is an accounting method that a company uses to record its profits or revenue resulting through its investment in another company, and the investing company reports the revenues in its income statement in an amount proportional to the percentage of its investment
Equity method: It is the standard method used when a company has a significant impact investment on another company (the investee company)
Equity method: It is the standard method used when a company has a significant impact investment on another company (the investee company)
4- What is the percentage of investments that have a significant impact?
Approximately (20-50%) of the investee company shares
5- What are the fair value alternatives for measuring investments?
1) Cost: The Investment is measured by [the cost minus the impairment in value (if it already exists)]]
2) Impairment Test (qualitative and quantitative)
3) Observable Price Changes
4) Similar Investment of the Same Issuer
2) Impairment Test (qualitative and quantitative)
3) Observable Price Changes
4) Similar Investment of the Same Issuer
6- What is a qualitative impairment test?
This first test determines whether this investment has decreased in value or not
7- What is a quantitative impairment test?
It is the difference between the fair value of the investment and the book value
8- Where is the value of investment impairment test losses recorded?
The investment impairment loss is recorded in the income statement
9- What is the method for measuring the investment of a significant impact?
Investments that give the holder a significant impact on the investee company are accounted using the equity method
10- How does the equity method affect the value of investments?
The Net income of the investee company affects by increasing the value of the investor's asset on their balance sheet, while the investee's loss or dividend payout affects by decreasing the value of that assets.
11- What are the types of investments in debt securities?
1) Held-to-Maturity Securities
2) Trading Securities
3) Available-for-Sale Securities
2) Trading Securities
3) Available-for-Sale Securities
12- What are Held-to-Maturity Securities?
These are securities held by the company that purchased them and held to maturity. These securities are recorded at cost (purchase cost), and gains or losses are recognized only after the company sells the security.
13- What are Trading Securities?
They are investments in securities that the company purchased in order to sell them and make a short-term profit
14- What are Available-for-Sale Securities?
These are investments in securities that the company purchases and holds for an indefinite period, which can be sold in case of need for cash.
15- What are property, plant and equipment (PPE)?
They are tangible fixed assets that can be used for more than one financial year, so they are called long-term assets
16- How are property, plant and equipment (PPE) recorded on the balance sheet?
These assets are recorded at historical cost plus any costs incurred by the company until the asset becomes ready for use
17- What is the difference between capital expenditures and revenue expenditures?
* Capital expenditures are the expenses that the company pays on the asset in order to improve the quality of its production or to increase its useful life
* Revenue expenditures are the expenses incurred by the company on the asset, but the company does not benefit from except in the current year only.
* Revenue expenditures are the expenses incurred by the company on the asset, but the company does not benefit from except in the current year only.
18- What are the methods for calculating depreciation?
1) Straight-line (SL)
2) Units-of-output method
3) Accelerated depreciation methods
4) Sum-of-the-years'-digits (SYD)
6) Group and composite depreciation
2) Units-of-output method
3) Accelerated depreciation methods
4) Sum-of-the-years'-digits (SYD)
6) Group and composite depreciation
19- What is an intangible asset?
It is an identifiable non-monetary asset that lacks physical substance
20- Give an examples for intangible assets
Licenses, trademarks, patents, copyrights, goodwill , ......
21- How are intangible assets recorded?
Intangible assets acquired from a third party (except goodwill), are recorded at purchase cost + any additional costs
22- According to GAAP, how is an intangible asset recognized if it is created or developed internally?
Intangible assets that have been developed internally (except for goodwill) are usually done through research and development, so this intangible asset is recorded only at the additional cost incurred by the company (registration costs + legal costs), so, the cost of research and development is not added to this asset, but they are recognized as an expense recorded in the income statement
23- According to IFRS, how is an intangible asset recognized if it is created or developed internally?
It differs with GAAP only in that the development cost is added to the asset, but with specific conditions
24- How is goodwill recorded on the balance sheet?
Goodwill appears in the balance sheet only in the case of merger between companies
Goodwill that was created internally is not recognized.
Goodwill has an indefinite useful life so it is not subject to amortization, (Amortization in intangible assets = depreciation in tangible assets), however, an impairment test is performed on goodwill to determine the impairment value
Goodwill that was created internally is not recognized.
Goodwill has an indefinite useful life so it is not subject to amortization, (Amortization in intangible assets = depreciation in tangible assets), however, an impairment test is performed on goodwill to determine the impairment value