Chapter One The Equity Method of Accounting for

Chapter One The Equity Method of Accounting for Investments Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education.

Learning Objective 1 -1 Describe in general the various methods of accounting for an investment in equity shares of another company. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -2

The Reporting of Investments in Corporate Equity Securities GAAP recognizes four methods to report investments in other companies: Ø Fair-value method. Ø Cost method for equity securities without readily determinable fair values. Ø Consolidation of financial statements. Ø Equity method. The method selected depends upon the degree of influence the investor (stockholder) has over the investee. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -3

Fair-Value Method Use when: Ø Investor holds a small percentage of equity securities of investee. Ø Investor cannot significantly affect investee’s operations. Ø Investment is made in anticipation of dividends or market appreciation. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -4

Recording Fair-Value Method Initial investments in equity securities when significant influence and control are not present are: Ø Recorded at cost. § Adjusted to fair value if fair value is determinable. § If fair value not determinable, remains at cost. Ø Changes in fair values are recognized as income. Ø Dividends declared on the securities are recognized as income. As of December 15, 2017, available-for-sale category with fair value changes recorded in other comprehensive income will no longer be available. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -5

Fair-Value Method and Impairment Assessment GAAP allows for two fair value assessments that may affect cost method amounts reported on the financial statements: 1. Periodic assessment for impairment to determine if the fair value of the investment is less than its carrying amount. 2. Recognition of “observable price changes in orderly transactions for the identical or a similar investment of the same issuer” as unrealized holding gains (or losses). Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -6

Consolidation of Financial Statements Ø Required when investor’s ownership exceeds 50 percent of an organization’s outstanding voting stock. Ø When a majority of voting stock is held, investorinvestee relationship is so closely connected that the two corporations are viewed as a single entity. Ø One set of financial statements prepared to consolidate all accounts of the parent company and all of its controlled subsidiaries as a single entity. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -7

FASB ASC Section 810 -10 -05, Variable Interest Entities Ø Includes entities controlled through special contractual arrangements (not through voting stock interests). Ø Intended to combat misuse of SPE’s (special purpose entities) to keep large amounts of assets and liabilities off the balance sheet known as “offbalance-sheet financing. ” Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -8

Equity Method Use when: Ø Investor has the ability to exercise significant influence on investee operations (whether applied or not). Ø Ownership is between 20 percent and 50 percent. Significant influence might be present with much lower ownership percentages. Under the equity method, investor’s share of investee dividends declared are recorded as decreases in the investment account, not income. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -9

International Accounting Standard 28—Investments in Associates Ø The International Accounting Standards Board defines significant influence as the power to participate in the financial and operating policy decisions of the investee, but it is not control or joint control over those policies. Ø If investor has 20 percent or more ownership, it is presumed to have significant influence, unless it is demonstrated not to be the case. Ø If investor holds less than 20 percent ownership, it is presumed it does not have significant influence, unless influence can be clearly demonstrated. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -10

Learning Objective 1 -2 Identify the sole criterion for applying the equity method of accounting and know the guidelines to assess whether the criterion is met. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -11

Criteria for Utilizing the Equity Method Significant Influence (FASB ASC Topic 323): Ø Ø Ø Representation on the investee’s board of directors. Participation in the investee’s policy-making process. Material intra-entity transactions. Interchange of managerial personnel. Technological dependency. Other investee ownership percentages. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -12

Limitations of Equity Method Applicability Regardless of investor’s degree of ownership, the equity method is not appropriate if investments demonstrate: Ø An agreement exists between investor and investee by which the investor surrenders significant rights as a shareholder. Ø A concentration of ownership operates the investee without regard for the views of the investor. Ø The investor attempts but fails to obtain representation on the investee’s board of directors. If an entity can exercise control over investee, regardless of ownership level, consolidation is required. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -13

Extensions of Equity Method Applicability Ø For some investments that fall short of or exceed 20 to 50 percent ownership, the equity method is appropriately used for financial reporting. Ø Conditions can exist where the equity method is appropriate despite a majority ownership interest. Ø If the noncontrolling rights are so restrictive as to call into question whether control rests with the majority owner, the equity method is employed for financial reporting rather than consolidation. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -14

Summary of Accounting Methods Applicable in Various Stock Ownership Levels Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -15

Accounting for Increases in an Investment—The Equity Method Ø The investor increases the investment account as the investee earns and reports income. The investor uses the accrual method to record investment income—recognizing it in the same time period as the investee earns it. Ø Upward adjustments in the asset balance are recorded as soon as the investee makes a profit. The investor reduces the investment account if the investee reports a loss. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -16

Accounting for Decreases in an Investment—The Equity Method Ø The investor decreases its investment account’s carrying value for its share of investee cash dividends. When the investee declares a cash dividend, its owners’ equity decreases. Ø The investor shall recognize its share of the earnings or losses of an investee in the periods for which they are reported by the investee in its financial statements. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -17

Equity Method Example Big Company owns a 20 percent interest in Little Company purchased on January 1, 2017, for $200, 000. Little reports net income of $250, 000, $300, 000, and $400, 000, respectively, in the next three years while declaring dividends of $50, 000, $100, 000, and $200, 000. The fair values of Big’s investment in Little, as determined by market prices, were $245, 000, $282, 000, and $325, 000 at the end of 2017, 2018, and 2019, respectively. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -18

Fair-Value vs. Equity Method EXHIBIT 1. 1 Comparison of Fair-Value Method (ASC 321) and Equity Method (ASC 323) *Equity in investee income is 20 percent of the current year income reported by Little Company. †The carrying amount of an investment under the equity method is the original cost plus income recognized less dividends. For 2017, as an example, the $240, 000 reported balance is the $200, 000 cost plus $50, 000 equity income less $10, 000 in dividends. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -19

Learning Objective 1 -3 Prepare basic equity method journal entries for an investor and describe the financial reporting for equity method investments. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -20

Equity Method Example—Journal Entries Big Company records the following journal entries to apply the equity method for its investment in Little Company for 2017: 1 st entry: Big accrues income based on the investee’s reported earnings. 2 nd entry: Big records dividend declaration and reduction in Little’s net assets. 3 rd entry: Big reports the collection of cash dividends. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -21

Learning Objective 1 -4 Allocate the cost of an equity method investment and compute amortization expense to match revenues recognized from the investment to the excess of investor cost over investee book value. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -22

Excess of Investment Cost over Book Value Acquired Differences may exist between a company’s book value and fair value because: Ø Fair value is based on multiple factors, including but not limited to profitability, new products, expected dividend payments, projected operating results, and general economic conditions. Ø Stock prices are based, partially, on the perceived worth of a company’s net assets, amounts that often vary from underlying book values. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -23

Excess of Investment Cost over Book Value Acquired (continued) Ø Asset and liability accounts on the balance sheet tend to measure historical costs rather than current value. Ø Reported figures are affected by the accounting methods selected and lead to different book values; for example: Ø Inventory costing methods (LIFO and FIFO). Ø Acceptable depreciation methods (straight-line, units of production). Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -24

Excess of Investment Cost over Book Value Acquired (concluded) Ø When purchase price exceeds book value of an investment acquired, the difference must be identified. Ø Assets may be undervalued on the investee’s books because: Ø The fair values (FV) of some assets and liabilities are different from their book values (BV). Ø The investor may be willing to pay extra because future benefits are expected to accrue from the investment. Ø Extra payment that cannot be attributed to a specific asset or liability is assigned to the intangible asset goodwill. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -25

Excess of Investment Cost over Book Value Acquired Example Grande Company is negotiating the acquisition of 30 percent of the outstanding shares of Chico Company. Chico’s balance sheet reports assets of $500, 000 and liabilities of $300, 000 for a net book value of $200, 000. Grande determines that Chico’s equipment is undervalued in the company’s financial records by $60, 000. One of its patents is also undervalued, but only by $40, 000. Adding these valuation adjustments to Chico’s book value indicates that the company’s net assets are estimated to be valued at $300, 000. Therefore, Grande offers $90, 000 for a 30 percent share of the investee’s outstanding stock. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -26

Excess of Investment Cost over Book Value Acquired—Valuations Grande’s purchase price is in excess of the proportionate share of Chico’s book value, which can be attributed to two specific accounts: Equipment and Patents. No part of the extra payment is traceable to any other projected future benefit. The cost of Grande’s investment is allocated as follows: Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -27

The Amortization Process Payment relating to each asset (except land, goodwill, and other indefinite life intangibles) should be amortized over an appropriate time period. Goodwill associated with equity method investments, for the most part, is measured in the same manner as goodwill arising from a business combination, tested for declines in value and impairment. Equity method investments are tested in their entirety for permanent declines in value. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -28

The Amortization Process— Journal Entries To record the annual expense, Grande reduces the investment balance in the same way it would amortize the cost of any other asset that had a limited life. At the end of the first year of holding the investment, the investor records the following journal entry under the equity method. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -29

Equity Method—Additional Issues Special procedures are required in accounting for each of the following: Ø Reporting a change to the equity method. Ø Reporting investee income from sources other than continuing operations. Ø Reporting investee losses. Ø Reporting the sale of an equity investment. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -30

Learning Objective 1 -5 a Understand the financial reporting consequences for a change to the equity method. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -31

Reporting a Change to the Equity Method Report a change to the equity method if: Ø An investment that was recorded using the cost or fair -value method reaches the point where significant influence is established. Ø When an investment qualifies for use of the equity method, the investor adds the cost of acquiring additional interest in the investee to the current basis and adopts the equity method of accounting [(FASB ASC (para. 323 -10 -35 -33)]. Ø This prospective approach avoids the complexity of restating prior period amounts. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -32

Reporting a Change to the Equity Method Example Ø Alpha Company acquires a 10 percent ownership in Bailey Company on January 1, 2017, for $84, 000. Ø Alpha company does not have the ability to exert significant influence over Bailey. Ø Alpha properly records the investment using the fair-value method and recognizes in net income its 10 percent ownership share of changes in Bailey’s fair value. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -33

Reporting a Change to the Equity Method without Significant Influence Ø Alpha Company recognizes the increase in its 10 percent ownership in Bailey Company at the end of 2017 and increases its investment account to $89, 000. Ø Because the fair-value method is used to account for the investment, Bailey’s $670, 000 book value balance at January 1, 2017, does not affect Alpha’s accounting. Ø On January 1, 2018, Alpha purchases an additional 30 percent of Bailey’s outstanding voting stock for $267, 000. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -34

Reporting a Change to the Equity Method with Significant Influence Ø On January 1, 2018, Alpha achieves the ability to exercise significant influence over Bailey, and will now apply the equity method to account for its investment in Bailey. Ø On January 1, 2018, Bailey’s carrying amounts for its assets and liabilities equaled their fair values except for a patent, which was undervalued by $175, 000 and had a 10 -year remaining useful life. Ø The fair value of Alpha’s total (40 percent) investment serves as the valuation basis. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -35

Recording a Change to the Equity Method Alpha prepares the following journal entry on January 1, 2018, to bring about prospective change to the equity method: Investment Allocation Schedule Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -36

Recording a Change to the Equity Method (continued) Bailey reports net income of $130, 000 and declares and pays a $50, 000 dividend at the end of 2018. Alpha records the following journal entries: Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -37

Learning Objective 1 -5 b Understand the financial reporting consequences for investee’s other comprehensive income. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -38

Other Comprehensive Income (OCI) Ø OCI is defined as revenues, expenses, gains, and losses that under GAAP are included in comprehensive income but excluded from net income. Ø Items included in AOCI (Accumulated Other Comprehensive Income) on the balance sheet are accumulated derivative net gains and losses, foreign currency translation adjustments, and certain pension adjustments. Ø Equity method accounting requires that the investor record its share of investee OCI and irregular items traditionally found in net income. Ø AOCI is reported in stockholders’ equity and represents a source of change in investee company net assets that is recognized under the equity method. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -39

Learning Objective 1 -5 c Understand the financial reporting consequences for investee losses. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -40

Reporting Investee Losses Ø Declines in investment value can result due to a loss of major customers, changes in economic conditions, loss of a significant patent or other legal right, damage to the company’s reputation, etc. A temporary drop in the fair value of an investment is simply ignored. Ø FASB ASC (para. 323 -10 -35 -32) requires that a loss in value of an investment which is other than a temporary decline shall be recognized. Ø A permanent decline in the investee’s fair market value is recorded as an impairment loss and the investment account is reduced to the fair value. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -41

Investment Reduced to Zero Ø When accumulated losses incurred and dividends paid by the investee reduce the investment account to $-0 -, no further loss can be accrued. A temporary decline is ignored! Ø Once the original cost of the investment has been eliminated, no additional losses can accrue to the investor. Ø Future equity income will be offset by these losses prior to recording equity income in our results. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -42

Learning Objective 1 -5 d Understand the financial reporting consequences for sales of equity method investments. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -43

Reporting the Sale of an Equity Investment If part of an investment is sold during the period: Ø The equity method is applied up to the transaction date. Ø At the transaction date, the Investment account balance is reduced by the percentage of shares sold. Ø If significant influence is lost, NO RETROACTIVE ADJUSTMENT is recorded if the investor is required to change FROM the equity method to the fair-value method. Ø Note: A change TO the equity method mandates a restatement of prior periods, unlike when the investor’s change is to the fair-value method. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -44

Learning Objective 1 -6 Describe the rationale and computations to defer gross profits on intra-entity inventory sales until the goods are either consumed or sold to outside parties. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -45

Deferral of Intra-Entity Gross Profits in Inventory Many equity acquisitions establish ties between companies to facilitate the direct purchase and sale of inventory items. Such intra-entity transactions can occur either on a regular basis or sporadically. EXHIBIT 1. 2 Downstream and Upstream Sales Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -46

Downstream Sales of Inventory— Investor Sales to Investee Ø Profit recognition is delayed until buyer disposes of the goods. Ø Investor decreases current equity income to reflect the deferred portion of the intra-entity profit. Ø When this inventory is eventually consumed or sold to unrelated parties, the deferral is no longer needed. Ø The investor should recognize the deferred intra-entity gross profit. Recognition shifts from the year of inventory transfer to the year in which the sale to unrelated customers occurred. Ø An alternative treatment would be the direct reduction of the investor’s inventory balance as a means of accounting for this deferred amount. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -47

Downstream Sales of Inventory—Investor Sales to Investee Journal Entries If gross profit on an original intra-entity sale is 30 percent of $10, 000 in sales, investor profit associated with the sale is $3, 000. If 40 percent of investee’s stock is held, just $1, 200 of the profit is deferred. Current equity income decreases by $1, 200 to defer the intra-entity profit and temporarily remove 30 percent of the profit from the investor’s books in 2018 until the investee disposes of the inventory in 2019. Reverse the preceding deferral entry to move the profit into the year of sale to outside customers. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -48

Upstream Sales of Inventory—Investee Sales to Investor Ø Upstream sales of inventory are reported in the same manner as downstream sales. Ø Profit recognition is delayed until buyer disposes of the goods. Ø Investor decreases current equity income to reflect the deferred portion of the intra-entity profit. Ø The investor’s own inventory account contains the deferred gross profit. Recognition of profit is deferred by decreasing the investment account rather than the inventory balance. Ø When this inventory is eventually consumed or sold to unrelated parties, the deferral is reversed. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -49

Upstream Sales of Inventory—Investee Sales to Investor Journal Entries Suppose the investee sells merchandise costing $40, 000 to the investor for $60, 000, and at year’s end, the investor still retains $15, 000 of the goods. The investee reports net income of $120, 000 for the year. The investor records a journal entry to reflect the basic accrual of the investee’s earnings. A second entry is required of the investor at year-end. Income accrual is reduced, and the investor defers its portion of the intra-entity gross profit. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -50

Financial Reporting Effects Measurements of financial performance often affect the following: Ø The firm’s ability to raise capital. Ø Managerial compensation. Ø The ability to meet debt covenants and future interest rates. Ø Managers’ reputations. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -51

Criticisms of the Equity Method Ø Emphasizing the 20– 50 percent of voting stock in determining significant influence versus control. Ø Allowing off-balance-sheet financing. Ø Potentially biasing performance ratios. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -52

Learning Objective 1 -7 Explain the rationale and reporting implications of fair-value accounting for investments otherwise accounted for by the equity method. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -53

Fair-Value Reporting Option Ø An entity may irrevocably elect fair value as the initial and subsequent measurement for certain financial assets and financial liabilities, including investments accounted for under the equity method. Ø Under the fair-value option, changes in the fair value of the elected financial items are included in earnings. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -54

Fair-Value Reporting Option (continued) Ø The fair-value option improves financial reporting. It provides entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. Ø The fair-value option matches asset valuation with fair-value reporting requirements for many liabilities. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 1 -55