University Accounting Assignment: FAS 141R and FAS 160 Analysis

This accounting assignment analyzes the impact of FAS 141R and FAS 160 on financial statements. The assignment explores how these standards affect key financial ratios like leverage, particularly debt-to-asset and debt-to-equity ratios, by revaluing assets and liabilities to fair market value. It also examines the changes to non-controlling interests and the convergence of US GAAP with IFRS. The assignment further discusses the role of special purpose entities (SPEs) and the changes companies should be aware of upon adopting new IFRS standards like IFRS 9 and the application of revenue from contracts with customers. The document concludes with a comparison of IFRS and GAAP, highlighting differences in context, elements of performance, inventory estimation, and qualitative characteristics. The assignment provides a comprehensive overview of the implications of these accounting standards on financial reporting and business practices.

0
Running head:
Accounting
Name of the student
Name of the university
Student ID
Author note

1
ACCOUNTING
Table of Contents
Answer 2..........................................................................................................................................2
Answer 3..........................................................................................................................................2
Answer 4..........................................................................................................................................3
Answer 5..........................................................................................................................................3
Answer 6..........................................................................................................................................4
Reference.........................................................................................................................................5

2
ACCOUNTING
Answer 1
After summarizing the case, the key financial ratio that are likely to be affected by the
adoption of FAS 141R and FAS 160 (Yang, Poon & Lee, 2018) are leverage ratio, which further
means “debt to asset” and “debt to equity ratio”. This is very clear that the adoption of this two
concepts FAS 141R and FAS 160 affect to this particular ratio. Here it is reframed in the
financial statements that all assets and liabilities are revalued to fair market value at the
acquisition date. It will affect while the value of assets are overvalued and since they are valued
at a full market value. Acquiring the assets is recognized is an expenses of the company.
According to the new standards, the cost of acquiring assets will be charged as expenses and as a
result it happens an income to decline. Thus for the company to meet its targeted profits. Then
the acquisition strategy set earlier would have to change to avoid impacting its growth
negatively.
Answer 2
The FASB studied these accounting standards to represent economic events more loyally and
to follow FASB’s goal of convergence with the international accounting standards. FAS 160
(Wen & Moehrle, 2016) changes thew non-controlling interest. As per the old method the
“controlling interest” is recognized at rational value, while remaining “non-controlling interest”
charged as its carrying value, but the new method says acquired less than 100% controlling
interest and 100% of the acquired net assets are verified at Fair Value. Therefore, in previous
method, company is referring a partial acquisition where the controlling interest is acquired.
Since there is a gap between controlling interest which is charged as fair value and non

3
ACCOUNTING
controlling interst which is charged as carrying value. Thus this difference effcts on EBIDTA.
Whereas the new rule implies all the acquisition at fair value so there will be no gap of posting
the charged on EBIDTA (Sui, 2017). Therefore the companys’ grow potentially.
Answer 3
From the FAS 141R and FAS 160, gives an outcome that the primary reasons for which
FASB issued these two standards to upsurge the relevance, comparability and dependability of
the “financial statements. Secondly this joint projects approved by FASB and IASB which had
the main objective of facilitating convergence in the financial accounting field making FAS
141R. The Financial Accounting Standards Board (FASB) has issued FASB statements No. 141
and 160 for combination of business, which refers the non controlling interest in the consolidated
financial statements. This standards issued the IASB will improve reporting at the time of
eliminating the source regarding the signifance of “International Financial Reporting Standards”
(IFRS) and “US Generally Accepted Accounting Principles” (GAAP) (Ruppel, 2017).
Answer 4
Issuing the standards of statement 140, it will need more evidence about the transfer of
the financial assets which includes the securitization of the statements. SPE is a comprehensive
term and in the context of the special purpose vehicle, it is used interchangeably. Special purpose
corporations are used for a variety of legitimate purposes involved the risk managent (McNeil,
Frey & Embrechts, 2015). It also accounted as a off balance sheet arrangements may called
qualyfing special purpose entities. According to the SFAS 140, transfer accounting and financial
assets servicing and the extinguishment of the obligations.

4
ACCOUNTING
Yes they exist under the IFRS, statement of 140.
Statement number (166) is a amendment to statement of 140, Accounting for transfers and
servicing of the Financial Assets and the extinguishments of the liabilities, it will entail a transfer
of the financial assets, which has affect balance sheet of the financial institutions.
Answer 5
If a company adopts then the changes that should be aware of by the management are as follows:
 The fully applicable of the new statndards of IFRS 9.
 Application of revenue from contracts with customers
 Amendment of IFRS, share based payment
 Insurance contract
 IAS 28 (Camfferman, & Zeff, 2015) investments in associates and joint venture.
Answer 6
Difference between IFRS and GAAP
Here the presentation of IFRS and GAAP are discussed below:
GAAP IFRS
Context The guidelines are for structural
financial accounting
It allows international
business for the
understanding of each other
business

5
ACCOUNTING
Elements of
performance
Revenue or expenses, assets or
liabilities, gains and losses and
comprehensive income
Revenue or expenses assets
or liabilities
Inventory estimation LIFO, FIFO or weighted average
cost
FIFO or average cost
Purpose It has no provision of significant
requirement to consider the
framework in a management
level.
Under the IFRS, it considers
the framework.
Development Cost Considers expenses under the
GAAP
As per the IFRS cost can be
capitalized.
Qualitative
chraterstics
Relevance, reliability, and
understandability, comparability
GAAP maintains of these in a
hirerchy.
Relevance, reliability,
comparability and
understandability, IFRS
refers that decision would
not take depending on the
special circumstances.

6
ACCOUNTING
Reference
Yang, J. G., Poon, W. W., & Lee, J. Z. H. (2018). The Impact Of The New Consolidation
Accounting Standards On Financial Statements. Business Journal for Entrepreneurs, 2018(4).
Wen, H., & Moehrle, S. R. (2016). Accounting for goodwill: An academic literature review and
analysis to inform the debate. Research in Accounting Regulation, 28(1), 11-21.
Sui, Y. (2017). The Research on the Applications and Limitations of EBITDA. DEStech
Transactions on Environment, Energy and Earth Sciences, (icseep).
Ruppel, W. (2017). Wiley GAAP for Governments 2017: Interpretation and Application of
Generally Accepted Accounting Principles for State and Local Governments. John Wiley &
Sons.
McNeil, A. J., Frey, R., & Embrechts, P. (2015). Quantitative risk management: concepts,
techniques and tools-revised edition. Princeton university press.
Camfferman, K., & Zeff, S. A. (2015). Aiming for global accounting standards: the International
Accounting Standards Board, 2001-2011. Oxford University Press, USA.

7
ACCOUNTING