Intermediate Accounting
9th Edition
ISBN: 9781259722660
Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher: McGraw-Hill Education
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Chapter A, Problem 1BYP
Real World Case A–1
Derivative losses; recognition in earnings
The following is an excerpt from a disclosure note of Johnson & Johnson:
6. Fair Value Measurements (in part)
As of January 3, 2016, the balance of deferred net losses on derivatives included in accumulated other comprehensive income was $36 million after-tax. The Company expects that substantially all of the amounts related to forward foreign exchange contracts will be reclassified into earnings over the next 12 months as a result of transactions that are expected to occur over that period.
Required:
- 1. Johnson & Johnson indicates that it expects that substantially all of the balance of deferred net losses on derivatives will be reclassified into earnings over the next 12 months as a result of transactions that are expected to occur over that period. What is meant by “reclassified into earnings”?
- 2. What type(s) of hedging transaction might be accounted for in this way?
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Problems 26-30 assume that a U.S.-based company is issuing securities to foreign investors who require financial statements prepared in accordance with IFRS. Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes for each problem.Rawl Corporation sold a building to a bank at the beginning of 2017 at a gain of $76,000 and immediately leased the building back for a period of four years. The lease is accounted for as an operating lease.a. Determine the appropriate accounting for this sale and leaseback for the years ending December 31, 2017, and December 31, 2018, under (1) U.S. GAAP and (2) IFRS.b. Prepare the entry(ies) that Rawl would make on the December 31, 2017, and December 31, 2018, conversion worksheets to convert U.S. GAAP balances to IFRS.
Chapter A Solutions
Intermediate Accounting
Ch. A - Prob. A.1QCh. A - Prob. 2QCh. A - Prob. A.2QCh. A - Prob. 3QCh. A - Prob. A.3QCh. A - Prob. 4QCh. A - Prob. A.4QCh. A - What is the effect on interest of an interest rate...Ch. A - Prob. A.5QCh. A - How are derivatives reported on the balance sheet?...
Ch. A - Prob. A.6QCh. A - When is a gain or a loss from a cash flow hedge...Ch. A - Prob. A.7QCh. A - Prob. 1ECh. A - Prob. A.1ECh. A - Derivatives; interest rate swap; fixed rate debt...Ch. A - Derivatives; interest rate swap; fixed rate...Ch. A - Derivatives; interest rate swap; fixed rate debt;...Ch. A - Prob. 5ECh. A - Derivatives; interest rate swap; fixed-rate debt;...Ch. A - Derivatives; interest rate swap On January 1,...Ch. A - Derivatives; interest rate swap; comprehensive...Ch. A - Derivatives; interest rate swap; fixed rate debt;...Ch. A - Real World Case A1 Derivative losses; recognition...Ch. A - Research Case A4 Issue related to the derivatives...Ch. A - Prob. A.4BYP
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