ASU 2016-01 Attempted to Simplify the Impairment Model for Equity

question 21

Essay

ASU 2016-01 attempted to simplify the impairment model for equity securities for which an entity has elected the practicability exception by eliminating the requirement to assess whether an impairment of such an investment is other than temporary. What are the factors to be considered in making this assessment and how is an impairment recorded?

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Definitions:

Times Interest Earned Ratio

A financial ratio that measures a company's ability to meet its debt obligations by comparing its earnings before interest and taxes to its interest expenses.

Financial Statements

Formal records of the financial activities and position of a business, person, or other entity, including the balance sheet, income statement, and cash flow statement.

Bond Issue

The process by which an issuer creates a financial security (bond) that can be purchased by investors, representing a loan made by the investor to the issuer.

Interest Payable

This refers to the amount of interest expense that a company owes to its creditors, which has been incurred but not yet paid.