Mall Street

SAB 104 - what are the 4 major criteria/rules (revenue recognition)? 

Sale Price, Collectibility, Transfers have occurred, and #4 

What is a multiple element arrangement and what are the two criteria set in FASB rules in order to be considered one? 

Upfront Fees for future service? 

Generally have to be amortized 

Sales returns - certain situations when it is okay for company to recognize revenue even though sales return provision, provided certain conditions or features?    

Has to be estimable (homogenous products, around for a while, and company has good estimates and statistics) 

Fair Value - what's the heirarchy?  

Level 1 - WSJ ie something posted 

Level 2 - there are similar models or transactions to get an implied price/estimate 

Level 3 - hard to value assets like private equity and alternative investments where no market to base off of similar transactions/products  

Fair Value Option?  

Companies have option to value investments at FV but cannot change/must do it consistently.  Can decide only to elect portion of portfolio at FV (doesn’t need to be entire thing) 

What is a market participant's view, and how is that view used in a evaluating an asset? 

We consider "highest use" of the asset to result in higher value not just acquirer specific needs  

SEC allowed companies to use their own models for investment valuations rather than the standard after the credit crisis (caved in a little bit) to peer pressure for assets that were going to be held to avoid dramatic losses 

Leasing project rules? 

Expected credit loss model? 

Companies recognized their losses too late, so FASB is coming up with this model which is going to require companies from day they make a loan to project when their losses? 

Where is SEC at in terms of convergence?  

Theyre working on "new condorsement model" where IASB and FASB will do their own things and try to work together but it isnt in a total way. They will take from each other...