AACSB assurance of learning standards in accounting
and business education require documentation of
outcomes assessment. Although schools, departments, and faculty may approach assessment and its
documentation differently, one approach is to provide specific questions on exams that become the
basis for assessment. To aid faculty in this endeavor, we have labeled each question, exercise, and
problem in Intermediate Accounting, 9e, with the following AACSB learning skills:
Question
s
AACSB Tags
A-1 Reflective thinking
A-2 Reflective thinking
A-3 Analytic
A-4 Reflective thinking
A-5 Reflective thinking
A-6 Reflective thinking
A-7 Reflective thinking
Exercises
A-1 Reflective thinking
A-2 Analytic
A-3 Analytic
A-4 Analytic
A-5 Analytic
A-6 Analytic
Problems
A-1 Reflective thinking , Analytic
A-2 Reflective thinking, Analytic
A-3 Reflective thinking , Analytic
Question A–1
These instruments “derive” their values or contractually required cash flows from
some other security or index.
Question A–2
The FASB has taken the position that the income effects of the hedge instrument
© The McGraw-Hill Companies, Inc., 2018
Appendix A: Derivatives A-‘
Appendix A Derivatives
QUESTIONS FOR REVIEW OF KEY TOPICS
Question A–3
If interest rates change, the change in the debt’s fair value will be less than the
change in the swap’s fair value. The gain or loss on the $500,000 notional difference
Question A–4
A futures contract is an agreement between a seller and a buyer that calls for the
seller to deliver a certain commodity (such as wheat, silver, or Treasury bond) at a
Question A–5
© The McGraw-Hill Companies, Inc., 2018
Appendix A: Derivatives A-‘
Answers to Questions (continued)
Question A–6
All derivatives, without exception, are reported on the balance sheet as either assets
Question A–7
A gain or loss from a cash flow hedge is deferred as other comprehensive income
Exercise A–1
Indicate (by abbreviation) the type of hedge each activity described below would
represent.
Hedge Type
FV Fair value hedge
CF Cash flow hedge
FC Foreign currency hedge
N Would not qualify as a hedge
Activity
FV 1. An options contract to hedge possible future price changes of inventory.
CF 2. A futures contract to hedge exposure to interest rate changes prior to
replacing bank notes when they mature.
CF 3. An interest rate swap to synthetically convert floating rate debt into fixed
rate debt.
FV 4. An interest rate swap to synthetically convert fixed rate debt into floating
rate debt.
FV 5. A futures contract to hedge possible future price changes of timber covered
by a firm commitment to sell.
© The McGraw-Hill Companies, Inc., 2018
Appendix A: Derivatives A-‘
CF 6. A futures contract to hedge possible future price changes of a forecasted
sale of tin.
FC 7. ExxonMobil’s net investment in a Kuwait oil field.
CF 8. An interest rate swap to synthetically convert floating rate interest on a
stock investment into fixed rate interest.
N 9. An interest rate swap to synthetically convert fixed rate interest on a
held-to-maturity debt investment into floating rate interest.
CF 10. An interest rate swap to synthetically convert floating rate interest on a
held-to-maturity debt investment into fixed rate interest.
FV 11. An interest rate swap to synthetically convert fixed rate interest on a stock
investment into floating rate interest.
© The McGraw-Hill Companies, Inc., 2018
Appendix A: Derivatives A-‘
Exercise A–2
Requirement 1
January 1 March 31 June 30
Fair value of interest rate swap 0 $6,472 $11,394
Fair value of note payable $200,000 $206,472 $211,394
Fixed rate 10% 10% 10%
© The McGraw-Hill Companies, Inc., 2018
Appendix A: Derivatives A-‘
Exercise A–2 (concluded)
Requirement 2
January 1
Cash 200,000
March 31
Interest expense ([10% x ¼] x $200,000) 5,000
Cash 5,000
To record interest
June 30
Interest expense ([10% x ¼] x $200,000) 5,000
Cash 5,000
To record interest
© The McGraw-Hill Companies, Inc., 2018
Appendix A: Derivatives A-‘
To record change in fair value of the note
© The McGraw-Hill Companies, Inc., 2018
Appendix A: Derivatives A-‘
Exercise A–3
Requirement 1
January 1 March 31 June 30
Fair value of interest rate swap 0 $6,472 $11,394
Fair value of investment $200,000 $206,472 $211,394
Fixed rate 10% 10% 10%
© The McGraw-Hill Companies, Inc., 2018
Appendix A: Derivatives A-‘
Exercise A–3 (concluded)
Requirement 2
January 1
Investment in notes 200,000
March 31
Cash 5,000
Interest revenue ([10% x ¼] x 200,000) 5,000
To record interest
June 30
Cash 5,000
Interest revenue ([10% x ¼] x $200,000) 5,000
To record interest
Interest revenue 2,000
© The McGraw-Hill Companies, Inc., 2018
Appendix A: Derivatives A-‘
© The McGraw-Hill Companies, Inc., 2018
Appendix A: Derivatives A-‘