tailieunhanh - Ebook Financial accounting - An introduction to concepts, methods, and uses (14th edition): Part 2

(BQ) Part 2 book "Financial accounting - An introduction to concepts, methods, and uses" has contents: Marketable securities and derivatives; intercorporate investments in common stock; notes, bonds, and leases; statement of cash flows - Another look,.and other contents, | Find more at Liabilities: Off-Balance-Sheet Financing, Retirement Benefits, and Income Taxes 1. Understand why and how firms use off-balance-sheet financing and the authoritative guidance for it. 2. Understand the issues in measuring and recognizing the cost of retirement benefits and in reporting overfunded and underfunded benefits. 3. Understand the effects of recognizing revenues and expenses for financial reporting in a period different from that used for tax reporting. Chapter 12 L E A R N I N G OBJECTIVES C hapter 4 introduces the concept of an accounting liability. Chapter 9 discusses current liabilities and Chapter 11 discusses long-term notes, bonds, and leases. This chapter explores three additional topics related to the recognition and measurement of liabilities: 1. Off-balance-sheet financing, other than operating leases. 2. Retirement benefits. 3. Income taxes. OFF-BALANCE-SHEET FINANCING Off-balance-sheet financing refers to obtaining cash, or other assets, or services without a borrowing arrangement that qualifies for liability recognition under . GAAP or IFRS. This section explores the rationale for off-balance-sheet financing and the arrangements, other than operating leases (which were discussed in Chapter 11), that typically create such obligations. R ATIONALE FOR OFF-BALANCE-SHEET FINANCING Some managers cite the following reasons for using off-balance sheet financing: 1. Reduced borrowing costs. Lower borrowing costs might result if lenders ignore off-balancesheet financing in setting lending rates. 2. Avoid debt covenant violation. If debt covenants include only items that are recognized in the financial statements, off-balance sheet arrangements would not affect compliance with these covenants. For example, debt covenants may preclude increases in debt ratios. The first reason is based on an assumption that some lenders do not possess the knowledge, skills, and information needed to identify and deal with