New statements on loan impairment and accounting for debt and equity securities.The Financial Accounting Standards Board Financial Accounting Standards Board (FASB) Board composed of independent members who create and interpret Generally Accepted Accounting Principles (GAAP). issued statements addressing creditors' accounting for impairment of certain loans and specifying the accounting treatment of all debt and equity securities that have readily determined fair values. John R. Meinert, current principal of J. H. Chapman Group, Ltd. and a former board chairman of Hartmarx Corporation, said the FASB statements FASB Statement A standard set by the Financial Accounting Standards Board regarding a financial accounting and reporting method. Essentially, FASB statements determine the acceptable accounting practices that Certified Public Accountants use in reporting may make the duties of management accountants more complex but will benefit financial statement users in the long run because "they will force companies to place realistic values on assets as they go along rather than rely on writeoffs every several years." Statement no. 114, Accounting by Creditors for Impairment of a Loan, applies to all creditors and all loans regardless of whether they are collateralized - including all loans restructured in a troubled-debt restructuring involving a modification of terms. It does not apply to loans measured at fair value or the lower of cost or fair value, leases, debt securities or large groups of smaller balance homogeneous loans that are collectively evaluated for impairment. Statement no. 114 requires impaired loans within its scope to be measured on the basis of the present value of expected cash flows discounted at their effective interest rates (the contractual interest rates adjusted for any deferred loan fees or costs, premiums or discounts existing at the inception or acquisition of the loans). It amends Statement no. 5, Accounting for Contingencies, to clarify that creditors should evaluate the collectibility of both contractual interest and principal of all receivables when assessing the need to accrue a loss. It also amends Statement no. 15, Accounting by Debtors and Creditors for Troubled Debt Restructurings troubled debt restructuring See debt restructuring. , to require creditors to measure in accordance with Statement no. 114 all loans that are restructured in a troubled-debt restructuring involving a modification of terms. Statement no. 114 is effective for fiscal years beginning after December 15, 1994. Statement no. 115, Accounting for Certain Investments in Debt and Equity Securities, supersedes Statement no. 12, Accounting for Certain Marketable Securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has , and amends Statement no. 65, Accounting for Certain Mortgage Banking Activities, to remove mortgage-backed securities Mortgage-backed securities (MSBs) Securities backed by a pool of mortgage loans. from its scope. It is effective for 1994 calendar-year financial statements but may be applied to earlier fiscal years for which annual financial statements have not been issued. Statement no. 115 classifies securities according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. three categories: * Debt securities the enterprise has the positive intent and ability to hold to maturity are classified as hold-to-maturity securities and reported at amortized cost. Securities that may be sold because of interest rate changes or other factors no longer will be classified as hold-to-maturity securities. * Debt and equity securities that are bought and held principally to be sold in the near term are classified as trading securities and reported at fair value, with unrealized gains and losses included in earnings. * Debt and equity securities that do not fall into either of the above categories are classified as available for sale and reported at fair value, with unrealized gains and losses excluded from earnings and shown as a separate component of shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. . The statements are available for $10.50 each from the FASB FASB See: Financial Accounting Standards Board FASB See Financial Accounting Standards Board (FASB). order department, P.O. box 30816, Hartford, Connecticut “Hartford” redirects here. For other uses, see Hartford (disambiguation). Hartford is the capital of the State of Connecticut. It is located in Hartford County on the Connecticut River, north of the center of the state. 06150. Connecticut orders should include 6% sales tax sales tax, levy on the sale of goods or services, generally calculated as a percentage of the selling price, and sometimes called a purchase tax. It is usually collected in the form of an extra charge by the retailer, who remits the tax to the government. . |
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