ACCT 5341 Syllabus
Bob Jensen
at Trinity University
| [02] Roberts, Michelle | [03] Hobbs, William |
| [05] Lee, Matthew | [06] Hoffman, Robert |
| [07] Sandoval, Nikki | [08] Poppe, Amanda |
| [10] Vogtsberger, Carl | [11] Ausaf, Shuja |
| [14] Johnson, Colin | [15] Devins, Sean |
| [17] Thompson, Anne | [18] Gutierrez, Eugenia |
| [19] White, Steven | [20] Ifrah, Laury |
| [22] Dai, Wan Li | [23] Nguyen, Nancy |
| [29] Donohue, Alexia | [30] Menchaca, Ruth |
| [31] Heinkel, Mark | [32] Ramirez, Ricardo |
Accounting Theory Helpers and Links
Reading Assignments for This Week
Each student must submit an mentor attestation form. This form is to be signed and turned in each week in class. These forms can be found at http://www.trinity.edu/rjensen/acct5341/AttestMentor.htm
File 1 Question 01
What types of contracts are not eligible for hedge
accounting under SFAS 133?
[Hint: See Paragraphs 20, 21, and 399 of
SFAS 133.]
File 1 Question 02
Can a company that owns 1 million gallons of
aviation fuel in inventory hedge the sale of that fuel by entering a short position at
today's price? For example, the company might enter into a short sale or sell a put
option?
File 1 Question 03
Suppose a company has an interest rate swap that hedges the fair value of a pool
of fixed-rate loans. Recall from Paragraph 20 of SFAS 133 that
hedged items must be identified and formally documented at the inception of the hedge.
Can the portfolio of loans be altered with deletions and additions without ending
the fair value hedge?
File 1 Question 04
Suppose a company documents effectiveness of a fair value hedge as having to fall
in the range of 90% to 110%. If the hedge is 108% effective after the first few
months, does the carrying value have to be adjusted with the holding gain or loss being
posted to current earnings for this "effective" performance?
[See Paragraph 22 on pp. 15-16 of SFAS 133.]
File 1 Question 05
Can the premium on a forward contract be excluded when assessing hedge
effectiveness?
[See Paragraph 63 on pp. 44-45 of SFAS 133.]
File 1 Question 06
In Paragraph 142 of Example 6 of SFAS 133, suppose the that near the
end of Period 4, the hedge effectiveness completely disappears. Further assume that
the derivative is expected to have no value at the end of Periods 4 and 5. How would
the Periods 4 and 5 journal entries change from those shown in FAS 133?
[Hint: See Paragraph 26 of SFAS 133.]
File 1 Question 07
Paragraph 21a of SFAS 133 allows a hedged item to be a designated
portion of a financial asset or liability. Does this apply to a nonfinancial asset
such as a portion of a wheat crop on particular parcels of land?
[See Paragraph 21e.]
File 1 Question 08
Paragraph 21c of SFAS 133 does not allow a hedged item for a fair
value hedge to be an available-for-sale or trading security investment that is remeasured
for fair value. Does this also apply to receivables that are carried at
lower-of-cost-or-market?
File 1 Question 09
Suppose an airline company has a contract to purchase 1 million gallons of fuel
at the market rate in three months time. Because pilots have threatened to strike,
the airline company has enters into a forward contract to protect against a $50,000
penalty clause invoked if the company breaks that contract. Is this a firm
commitment and can this penalty clause be a hedged item under SFAS 133 rules?
Explain the FASB's reasoning on this issue.
[See See the definition of a "firm commitment" in Bob Jensen's SFAS 133 Glossary.]
File 1 Question 10
What specific methods for assessing hedge effectiveness are required under SFAS
133?
[See Paragraph 20 of SFAS 133. Also see Bob Jensen's SFAS 133 Glossary.]
File 1 Question 11
How did SFAS 133 change its preceding Exposure
Draft 162-B position on accounting for both the host contract and an embedded derivative?
[Hint: See Paragraph 299 of SFAS 133.]
File 1 Question 12
What types of indices may not be underlyings in a
SFAS 133 financial instruments derivative?
[Hint: See Paragraph 252 of SFAS.]
File 1 Question 13
How does dedesignation. affect the hedge of a
forecasted purchase of a commodity?
[Hint: See Paragraph 152 and Bob
Jensen's SFAS 133 Glossary. ]
File 1 Question 14
What is the implication of a blockage factor under
SFAS 133?
[Hint: See Bob Jensen's SFAS 133 Glossary.]
File 1 Question 15
Explain the key distinctions between
European versus American versus Asian options.
[Hint: See your textbook.
File 1 Question 16
Provide a brief summary of the alternatives for valuing options.
[Hint: See the term "option" in Bob Jensen's SFAS 133 Glossary.]
Partnership Assignment
Problems 13 and 14 on Page 145 of your Strong textbook.
Questions 5, 6, 7, and 8 beginning on Page 164 of your Strong textbook.
Discuss a class handout entitled "The Hocus Pcus of Hedge Accounting - Now
you see it, will you see it again?" After discussing the main issues with your
partner, take careful notes on the main points in this article.
By Yourself Reading Reading Assignments (take hand-written notes of assigned readings)
Chapters 6 and 7 of your Strong textbook. Take notes on the key points.
SFAS 133 Paragraph (114) and Example 8 beginning in Paragraph 153.
For class discussion and the quiz, carefully review Paragraphs 12-15.Self tests on Pages 144 and 164 of your Strong textbook.
(You are required to bring your textbooks and extra floppy discs to class)