Discussion Question #1 Refer to the article “Rising Interest Rates Trigger Losses on Banks Massive Bond Holdings” in Wall Street Journal (December 7, 2016). What is the difference between realized and unrealized gains and losses on security holdings? What are the three categories of investments identified in authoritative accounting literature? Cite the authoritative guidance you are referencing. What is the difference in accounting treatment of unrealized gains and losses across these three categories of investments? Cite the authoritative guidance you are referencing. Why do unrealized losses affect a bank’s book value but “don’t immediately diminish a banks profits”? In your answer, define the “special bucket…called ‘accumulated other comprehensive income.’”

Discussion Question #2 Refer to the article “Lease-Accounting Rules May Have Hurt Companies’ Valuations, Study Says” in Wall Street Journal (January 27, 2020) and “Pandemic Alters Lease Accounting Landscape” in Journal of Accountancy (May 31, 2020). What authoritative requirements made “a recent change in how companies are expected to account for and report operating leases on company balance sheets” (as in article 1)? What are operating leases? How are they shown on corporate balance sheets? Describe measuring an amount to be included on the balance sheet and the accounts that are affected. Consider your answer to the question above. How is it possible that accounting prior to the new lease accounting standard might not show operating leases on the balance sheet? Due to the pandemic, what was the change the companies with lease contract have to face? How should this change be accounted for? Cite the authoritative guidance when plausible.

Discussion Question #3

Refer to the article “Companies Start Reaping Billions in Tax Breaks to Help Ride Out Slump” in Wall Street Journal (May 13, 2020) and answer the following questions.

What are deferred tax assets and liabilities?

Why are disclosures about deferred taxes useful to identify the ways in which publicly traded companies are taking advantage of economic relief provided through the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”)?

Chipotle Mexican Grill, Inc., takes advantage of accelerated depreciation under the CARES Act. How does accelerating depreciation impact the Chipotle tax return? Does it also impact the depreciation expense reported on Chipotle’s income statement? Explain your answer.

Chipotle Mexican Grill reports that it will take additional accelerated depreciation expenses of $32,256,000 during the first quarter of 2020. At a federal income tax rate of 21%, how will the deferred tax impact of these accelerated depreciation charges be recorded?

What are net operating loss (NOL) carrybacks and carryforwards? Define each and explain how changing income tax rates impact the income tax benefits and refunds received bycorporations.

How does the NOL carryback introduced in the CARES Act allow companies a greater benefit than would a carryforward of net operating losses experienced during the Covid-19 pandemic?

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