Podcast
Questions and Answers
Under what circumstances does Hoogervorst state that it is more appropriate to use historical cost rather than fair value?
Under what circumstances does Hoogervorst state that it is more appropriate to use historical cost rather than fair value?
Historical cost may be more appropriate if the primary business activity is to use assets to produce goods and services.
According to Hoogervorst, what makes historical cost not immune from manipulation and abuse?
According to Hoogervorst, what makes historical cost not immune from manipulation and abuse?
Subjective updates are used for impairment assessments that involve estimating future cash flows.
Considering the IASB's stance on fair value, why might it not always be the default measurement basis, especially for assets combined to produce goods or services?
Considering the IASB's stance on fair value, why might it not always be the default measurement basis, especially for assets combined to produce goods or services?
Because it is not always relevant, especially for assets that are used in combination with others to produce goods or services rather than being held for trading. It avoids unnecessary volatility.
How do investors and creditors differ on measurement impact?
How do investors and creditors differ on measurement impact?
Considering cost constraints, what must standard-setters consider regarding the benefits of information provided to the users of financial statements versus the costs of providing and using the information?
Considering cost constraints, what must standard-setters consider regarding the benefits of information provided to the users of financial statements versus the costs of providing and using the information?
Why is historical cost useful for lenders and creditors despite its noted limitations?
Why is historical cost useful for lenders and creditors despite its noted limitations?
Under the mixed measurement system, how are plant, property, and equipment (PPE) subsequently measured according to IAS 16?
Under the mixed measurement system, how are plant, property, and equipment (PPE) subsequently measured according to IAS 16?
Explain the difference between 'value in use' and 'fulfilment value' when considering the present value of future cash flows?
Explain the difference between 'value in use' and 'fulfilment value' when considering the present value of future cash flows?
In the context of measuring assets and liabilities, what is the significance of considering 'comparability' as a secondary characteristic?
In the context of measuring assets and liabilities, what is the significance of considering 'comparability' as a secondary characteristic?
What distinguishes 'fair value' from 'realisable value' when focusing on exit values in asset measurement?
What distinguishes 'fair value' from 'realisable value' when focusing on exit values in asset measurement?
How does the definition of the 'current cost' of an asset contrast with that of a liability, in terms of considerations and transaction costs at the measurement date?
How does the definition of the 'current cost' of an asset contrast with that of a liability, in terms of considerations and transaction costs at the measurement date?
Explain why historical cost often falls short in reflecting an asset's relevance, particularly concerning the benefits derived from it?
Explain why historical cost often falls short in reflecting an asset's relevance, particularly concerning the benefits derived from it?
How do 'current cost' and 'replacement cost' differ in their approach to valuing and recording items, particularly in terms of the economic benefits they aim to provide?
How do 'current cost' and 'replacement cost' differ in their approach to valuing and recording items, particularly in terms of the economic benefits they aim to provide?
How are income and expenses defined in terms of their effect on an entity's equity, and what specific exclusions are noted in their definitions?
How are income and expenses defined in terms of their effect on an entity's equity, and what specific exclusions are noted in their definitions?
Describe the evidence-based approach for measurement decisions.
Describe the evidence-based approach for measurement decisions.
Flashcards
Assets
Assets
Potential to contribute to the flow of cash or cash equivalents.
Liabilities
Liabilities
Outflow/transfer of economic benefits; settles by payment, transfer asset, or services.
Equity
Equity
The residual interest in the assets of the entity after deducting all its liabilities.
Income
Income
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Expenses
Expenses
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Current Cost of an Asset
Current Cost of an Asset
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Current Cost of a Liability
Current Cost of a Liability
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Relevance
Relevance
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Faithful representation
Faithful representation
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Comparability
Comparability
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Fair Value
Fair Value
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Realisable Value
Realisable Value
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Historical Cost
Historical Cost
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Historical Cost (Asset)
Historical Cost (Asset)
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Historical Cost (Liability)
Historical Cost (Liability)
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Study Notes
Data Types
- Integers are whole numbers.
- Floats are numbers with decimal points.
- Strings are textual data.
- Booleans represent True or False values.
- Lists are ordered and mutable collections of items.
- Tuples are ordered and immutable collections of items.
- Sets are unordered collections of unique items.
- Dictionaries are collections of key-value pairs.
Data Structures
- Arrays consist of homogeneous data and are efficient for numerical operations.
- Linked Lists are sequences of nodes, each containing data and a link to the next node.
- Trees are hierarchical data structures with a root and child nodes.
- Graphs consist of nodes connected by edges, representing relationships.
- Hash Tables implement an associative array data type for mapping keys to values.
Algorithms
- Sorting algorithms arrange items in a specific order.
- Searching algorithms find specific items in a dataset.
- Dynamic Programming is an optimization technique for problems with overlapping subproblems.
- Greedy Algorithms make locally optimal choices at each step to find a global optimum.
- Graph Algorithms traverse and analyze graphs.
Libraries
- NumPy is a Python library focusing on numerical computing with arrays, linear algebra, and random number generation.
- Pandas is a Python library used for data manipulation and analysis through DataFrames, data cleaning, and data aggregation.
- Scikit-learn provides machine learning algorithms, including classification, regression, clustering, and model selection.
- Matplotlib is used for plotting and visualization, including line plots, scatter plots, histograms, and bar charts.
- Seaborn enhances statistical data visualization, offering improved plots, color palettes, and plot themes.
Machine Learning
- Supervised Learning involves learning from labeled data for Regression and Classification tasks.
- Linear Regression predicts continuous values using the equation y = mx + b.
- Polynomial Regression uses the equation y = a₀ + a₁x + a₂x² +...+ aₙxⁿ to predict continuous values.
- Logistic Regression models the probability of a binary outcome.
- Support Vector Machines (SVM) aims to maximize margin $\frac{2}{|w|}$ subject to $y_i(w^Tx_i - b) \geq 1$, for all i.
- Common Supervised Learning Algorithms include Decision Trees and Random Forests
- Unsupervised Learning occurs with unlabeled data through Clustering and Dimensionality Reduction.
- K-Means Clustering minimizes the sum of squared distances within each cluster.
- Principal Component Analysis (PCA) maximizes variance $var(Xw) = w^TSw$ subject to $|w| = 1$.
- Reinforcement Learning involves learning through interactions with an environment using algorithms like Q-Learning.
- Q-Learning updates Q-values using the equation $Q(s, a) \leftarrow Q(s, a) + \alpha[R(s, a) + \gamma \max_{a'} Q(s', a') - Q(s, a)]$.
Statistics
- Measures of Central Tendency include Mean, Median and Mode.
- The mean provides the average of a dataset: $\bar{x} = \frac{1}{n} \sum_{i=1}^{n} x_i$
- The median is the middle value of a sorted dataset.
- The mode indicates the most frequent value in a dataset.
- Measures of Dispersion include Variance, Standard Deviation and Range.
- Variance measures the spread of data points around the mean: $\sigma^2 = \frac{1}{n} \sum_{i=1}^{n} (x_i - \mu)^2$
- Standard Deviation is the square root of the variance.
- Range calculates the difference between the maximum and minimum values.
- Probability Distributions encompass Normal, Binomial, and Poisson Distributions.
- Normal Distribution: Is determined by the formula $f(x) = \frac{1}{\sigma\sqrt{2\pi}} e^{-\frac{1}{2}(\frac{x-\mu}{\sigma})^2}$
- Binomial Distribution is determined by the formula $P(X = k) = \binom{n}{k} p^k (1-p)^{n-k}$
- Poisson Distribution is determined by the formula $P(X = k) = \frac{\lambda^k e^{-\lambda}}{k!}$
- Hypothesis Testing uses T-tests, Chi-Square tests and ANOVA.
- Confidence Intervals can be calculated by the following formula: $\bar{x} \pm z * \frac{\sigma}{\sqrt{n}}$
Calculus
- Derivatives measure the rate of change of a function.
- Power Rule: $\frac{d}{dx} x^n = nx^{n-1}$
- Chain Rule: $\frac{d}{dx} f(g(x)) = f'(g(x)) * g'(x)$
- Integrals represent the area under a curve.
- Fundamental Theorem of Calculus is defined with the formula $\int_a^b f(x) dx = F(b) - F(a)$
Linear Algebra
- Vectors have magnitude and direction.
- Matrices are rectangular arrays of numbers.
- Eigenvalues and Eigenvectors satisfy the equation Av = λv.
- Matrix Operations include addition, multiplication, transpose, and inverse.
Big O Notation
- O(1) represents constant time complexity.
- O(log n) represents logarithmic time complexity.
- O(n) represents linear time complexity.
- O(n log n) represents linearithmic time complexity.
- O(n^2) represents quadratic time complexity.
- O(2^n) represents exponential time complexity.
- O(n!) represents factorial time complexity.
SQL
SELECT column1, column2 FROM table_name WHERE condition;
- Selects columns from a table based on a condition.INSERT INTO table_name (column1, column2) VALUES (value1, value2);
- Inserts new rows into a table.UPDATE table_name SET column1 = value1 WHERE condition;
- Modifies existing data in a table.DELETE FROM table_name WHERE condition;
- Removes rows from a table.JOIN
: Combine rows from two or more tables based on a related column.GROUP BY
: Group rows that have the same values into summary rows.
Cloud Computing
- AWS stands for Amazon Web Services.
- Azure represents Microsoft Azure.
- GCP refers to Google Cloud Platform.
Ethics
- Bias emerges as prejudice in data or algorithms.
- Privacy refers to protecting sensitive information.
- Fairness involves ensuring equitable outcomes
- Transparency focuses on understanding how algorithms make decisions.
- Accountability focuses on taking responsibility for the impact of data science.
Convex Functions
- A function $f$ is convex on interval $I$ if for all $x, y \in I, \forall t \in[0,1]$, $f(t x+(1-t) y) \leq t f(x)+(1-t) f(y)$.
- If $-f$ is convex, then $f$ is concave.
- Geometrically, the chord connecting $(x, f(x))$ and $(y, f(y))$ is above the graph of $f$ on $[x, y]$.
- A function such as $x \longmapsto x^{2}$ is convex on $\mathbb{R}$.
- If $f$ is convex on $I$, then $\forall x_{1}, \ldots, x_{n} \in I, \forall t_{1}, \ldots, t_{n} \in[0,1]$ such that $\sum_{i=1}^{n} t_{i}=1$, $f\left(\sum_{i=1}^{n} t_{i} x_{i}\right) \leq \sum_{i=1}^{n} t_{i} f\left(x_{i}\right)$.
- A differentiable function $f$ on an interval $I$ is convex if and only if $f^{\prime}$ is increasing on $I$.
- For a convex function, tangents are never above the curve.
- A twice-differentiable function $f$ on an interval $I$ is convex if and only if $f^{\prime \prime} \geq 0$ on $I$.
- Exponential function is convex on $\mathbb{R}$ as its second derivative is positive on $\mathbb{R}$.
Jensen's Inequality
- Let $I$ be an interval of $\mathbb{R}$, $f: I \rightarrow \mathbb{R}$ be a convex function, and $X$ be a real random variable such that $X(\Omega) \subset I$ and $\mathbb{E}(|X|)
Hans Hoogervorst and Measurement Approaches
- In a speech at the IFRS Conference in Paris, June 29, 2015, Hans Hoogervorst, addressed debates between historical cost and fair value.
- Historical cost and fair value exist on opposite ends of the measurement spectrum.
- Fair value requires a full update of all inputs, while historical cost updates partially and less frequently.
- Historical cost is favored for perceived objectivity and stability, carries elements of subjectivity, particularly when assessing impairments.
- Historical cost's stability may be misleading.
- Fair value is criticized for introducing volatility, but supporters argue it reflects economic reality + provides a more accurate picture of an entity's financial position.
- Fair value measurements can become subjective if not available, forcing reliance on model-based valuations, which can introduce uncertainties.
- Historical cost begins and ends with values close to fair value.
- Subjective impairment assessments can mean that historical cost is just as open to manipulation fair value accounting.
- IASB has not designated fair value as the default measurement basis.
- Current market value of assets used to produce goods for sale that are not going to be sold may not be crucial information
Policy Recommendations
- To improve financial reporting measurement, reports say standard-setters should adopt an evidence-based approach.
- Cost-effectiveness, fitness for purpose, and institutional context should guide decisions on measurements.
- Public policy considerations should be included in the decision-making process.
Common Measurement Issues
- Fundamental issues affect the reliability and relevance of measurement bases.
- Prediction and Estimation: rely on subjective predictions, prone to error
- Joint Asset Use: It is often difficult to measure individual assets that generate value jointly with other assets .Individual asset valuation inherently complex
- Market availability issues reduce fair assets and liabilities which reduces their objectivity
- Double-Entry Bookkeeping Impact: Measurement of one item in the accounts affects the measurement of another. This interconnectedness can sometimes lead to less sensible measurements
Alternative Measurement Approaches
- Value to the Business Basis: Measures how much worse off a business would be if it were deprived of a particular asset. Typically, this value is the asset's replacement cost.
- Fair Value - defined as the price at which an asset could be sold or a liability settled in an orderly transaction between market participants..
- Realisable Value - represents the amount that can be obtained from selling an asset, net of selling costs. This basis is especially relevant for assets held for sale
- Value in Use - the present value of future cash flows expected to be generated from an asset. Used for assessing the long-term performance and contribution of an asset to the business.
Mixed Measurement
- Mixed Measurement Approach: report advocates for using different measurement bases that are more appropriate for different assets and liabilities. Focus should be on cost-effective basis and fit for purpose
Financial Statements
- assets/liabilities and entities, may compromise the quality and usefulness of information.
- Users of Financial Statements consist of investors and creditors
- Existing and potential investors: Interested in risk and return on investment, and decisions to buy, sell or hold their shares. Impact on measurement: look forward with a perspective on current values
- creditors, whether amounts owing will be paid when due. Focus upon net position, impact on measurement: current value of assets and liabilities, to indicate future viability of the entity
Decision Criteria
- No single factor determines which measurement basis must be selected.
- The information must be relevant and truthful for users of financial statements
- The information must be as comparable, verifiable, timely and understandable
- Cost constraints take into consideration how useful financial statements are likely to justify the costs of providing and using that information
Historical Cost
- Assets recorded at the paid time of acquisition and liabilities as amount received or expected to be paid.
- Basis is widely regarded as reliable when based on actual events but lacks unrealistic gains and relevance for current decision making.
- Despite limitation, historical cost is useful to lenders and creditors aligns w/ preference for prudence in financial reporting
Aspects of a Mixed Measurement System
- Comparability: Amounts are discounted to the present day, reflecting the same point in time and currency but estimates and/or discretion is required
- Understandability: There is complex estimations and formulas.
Plant Property and Equipment (IAS 16)
- Initial measurement is cost
- Subsequent measurement: Cost Model using the cost less accumulated depreciation
- Revaluation Model = fair value at date of revaluation, less accumulated impairment losses
Intangible Assets (IAS 38)
- If acquired separately: record at purchase price + directly attributable costs
- If acquired as part of a business, record at fair value at acquisition date
- If internally generated: record expenditure to date as intangible meets eligibility criteria
- Cost model = cost less accumulated amortisation, less accumulated impairment losses. Revaluation model = fair value at revaluation time, less accumulated amortisation, less accumulated impairment losses.
Present Value and Value in Use/ Fulfilment Value.
- Cash flows must be adjusted to reflect the current value.
- Estimate and identify appropriate discount rates and future cash flows which are related to the items.
- Assumptions by market participants are less relevant.
- Assets are carried at the present discounted value of the future net cash inflows
- Liabilities are carried at the present discounted value of the future net cash outflows
Current Cost
- Current cost is the cost of an equivalent asset at the measurement date, and plus transaction fees.
- Current cost of a liability is the consideration that would be received minus transaction fees.
- Must be able to reflect what would be paid.
Fair Value and Realisable Value
- are exit values
- fair valued: the amount an entity would receive for an item assuming recognition is aligned w/ the characteristic of the item.
- Realiable valued, amount in an orderly and open transaction.
Popularity
- IFRS 3 financial instrument, IFRS for leases, IAS 2.
Historical Cost
- Items are recorded at the amount they were purchased or the amount at which were received
- amounts are based on transactions that actually occurred in the past.
- the cost is for acquiring or creating the asset , plus transactions costs.
- liability value plus transaction costs.
Current Costs
- are entry values
- Value and record items at the amount that would be paid at the current time to
- Provide or replace the future economic benefits expected to be derived from the current item (an equivalent) equivalent to current cost.
- identical value equals replacement costs
Equity
- This is the residual interest in the assets of the entity after deducting all its liabilities
Collision-Resistant Hash Functions
- A collision-resistant hash function h is where it's computationally infeasible to find distinct inputs x and y for which h(x) = h(y).
- Implies the function must be preimage resistant.
- An n-bit hash function can be broken with $2^{n/2}$ effort using a "birthday attack". Output size n should be at least 256 bits.
- A hash function $h$ : ${0,1}^* \rightarrow {0,1}^n$ is collision-resistant if no probabilistic polynomial-time adversary can find a collision with non-negligible probability.
- An adversary A outputs x and y. An experiment's generated key k is used by A to calculate probability. Output is 1 if $x \ne y$ and $h_k(x) = h_k(y)$; else 0.
- The function is collision-resistant if for every probabilistic polynomial-time algorithm A, the probability of the experiment's output being 1 is negligible. This protects digital signatures by hashing contracts. Eve creates two contracts, and finds a collision - one fair, one not.
- Putatively collision-resistant functions include SHA-1, SHA-2, SHA-3, BLAKE2, and BLAKE3.
Chemical Kinetics
- Chemical kinetics, also known as reaction kinetics, is the study of reaction rates and reaction mechanisms.
- Factors Affecting Reaction Rates.
- Reactant Concentration's general rule is increase to increase rate .
- Reaction $aA + bB \longrightarrow cC + dD$ Rate Law: $rate = k[A]^m[B]^n$. Where k= rate constant
- Reaction $aA + bB \longrightarrow cC + dD$ Rate Law: $rate = k[A]^m[B]^n$. Overall Reaction Order $m + n$.
- A temperature increase usually increases reaction rates.
- Arrhenius Equation: $k = Ae^{-\frac{E_a}{RT}}$
- Catalysts are substances that increase reaction rates without being consumed.
- Increasing surface area of a solid reactant increases the reaction rate. by providing more contact points for the reaction
- Increase the pressure of gaseous reactants usually increases the reaction rate. by increasing the concentration of the reactants
Reaction Mechanisms
- Elementary Steps are a series of simple steps that represent the progress of a reaction at the molecular level. Rate Determining Step. The slowest step in the mechanism, which determines the overall reaction rate is the rate determining step
- Intermediates do not appear in the overall balanced equation
- Rate Laws. Expresses reaction rate to concentrations of reactants from rate expression. Experimentally determined
- Differential Rate Law expresses the rate of reaction as a function of change in concentration of reactants per unit time.
- Integrated zero, first and second order functions as $[A]_t$, $[A]_0$ and $k$.
- Half-Life: time required for concentration of a reactant to decrease to one-half initial value
Collision Theory
- Molecular collisions, activation energy and molecule orientation are basic steps to collision theory.
- Effective collisions and ineffective collision key concepts depend on insufficient energy or incorrect molecule orientation.
Energy Profiles
- Activation Energy ($E_a$): Energy difference between reactants and the transition state.
- Enthalpy Change ($\Delta H$): Energy difference between reactants and products.
- Endothermic reactions results in $\Delta H > 0$ and absorbs heat
- Diagram: A plot of energy versus reaction progress, showing the energy changes during the reaction includes the activation energy, transition state, and enthalpy change
Reaction Rate: Definition
The reaction rate indicates the speed at which reactants are converted into products in a chemical reaction, and can be expressed as the change in concentration of a reactant or product per unit time.
Rate Expression - For a reaction: aA + bB ⟶ cC + dD
Rate = $-\frac{1}{a}\frac{\Delta[A]}{\Delta t} = -\frac{1}{b}\frac{\Delta[B]}{\Delta t} = \frac{1}{c}\frac{\Delta[C]}{\Delta t} = \frac{1}{d}\frac{\Delta[D]}{\Delta t}$.
Rate Law
- Equation that links the reaction rate to the concentrations of reactants is experimentally determined.
- General Form : The rate law is: Rate = k[A]^m[B]^n, where: k is the rate constant
- [A] and [B] are the concentrations of reactants. m and n the reaction orders.
Integrated rate laws
- Relate the concentration of reactants to time with general equations.
zero law as [A]_t = -kt + [A]_0,
and first law has been expressed $ln[A]_t = -kt + ln[A]_0$
second law as 1/[A]_t = kt + [A]_0.
- Reaction Mechanisms
Step-by-step sequence of elementary reactions by which overall chemical change occurs.
Elementary Steps
- Catalysis and frequency are related.
- Activation energy is required for a reaction to occur. Homogeneous Catalysis.
- catalyst is in the same phase.
- Heterogeneous Catalysis.
- catalyst in different phase.
Pan Peng and Overview
- Pan Peng is the instructor.
- Office is in Cupples I, Room 209.
- Office Hours are Tuesday & Thursday 2:00 PM - 3:00 PM.
- Email: [email protected]
- Website: Canvas.
Course Description
- This course explores fundamental principles in algorithm design and analysis. Discussions will include advanced data structures, graph algorithms, approximation algorithms, randomized algorithms, and online algorithms.
Prerequisites
- CSE 247 (Data Structures and Algorithms).
- CSE 347 (Analysis of Algorithms) or equivalent.
Grading
Category | Percentage |
---|---|
Homework | 40% |
Midterm Exam | 30% |
Final Exam | 30% |
Course Schedule (Tentative)
Week | Topic |
---|---|
1 | Introduction to Algorithms, Basic Data Structures |
2 | Amortized Analysis, Advanced Data Structures |
3 | Graph Algorithms |
4 | Approximation Algorithms I |
5 | Approximation Algorithms II |
7 | Randomized Algorithms I |
8 | Randomized Algorithms II |
9 | Online Algorithms I |
10 | Online Algorithms II |
11 | Advanced Topics (as time permits) |
12 | Review and Discussion |
Definition of Vector Spaces
-
A vector space over a field (\mathbb{K}) (often (\mathbb{R}) or (\mathbb{C})) is a set (E)
-
Addition Axioms $u, v, w \in E$ must have Associativity of $(u + v) + w = u + (v + w)$, have Commutativity of $u + v = v + u$, have element of zero.
-
Multiplication scalar has associativity as $(ab) \cdot u = a \cdot (b \cdot u)$
-
Subspaces, linear space and independence. Vector, eigenvalue and euclidean related to vectors. and space
-
Types of matrices
-
Square Matrix:
A matrix with the same number of rows and columns.
- Identity Matrix: A square matrix with 1s on the main diagonal and 0s elsewhere, denoted as I
- Null Matrix: A matrix whose elements are 0s.
- Transpose Matrix:
The transpose of a matrix A, denoted as $A^T$, is obtained by swapping the rows and columns of $A$ Invert Matrix:
The inverse of a square matrix $A$, denoted as $A^{-1}$ , is a matrix such that $AA^{-1} = A^{-1}A = I$
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