iLink Digital Interview Questions and Answers

Goodwill is an intangible asset that represents the value of a company's reputation, brand, and customer base.

• Goodwill is calculated as the difference between the purchase price of a company and the fair market value of its net assets.

• Negative goodwill occurs when the purchase price of a company is less than the fair market value of its net assets.

• Negative goodwill is recognized as a gain in the income statement of the acquiring company.

• In case of business combination, goodwi...read more

Derivative is a financial instrument whose value is derived from an underlying asset or security.

• Types of derivatives include futures, options, swaps, and forwards.

• Futures are contracts to buy or sell an asset at a predetermined price and date.

• Options give the buyer the right, but not the obligation, to buy or sell an asset at a predetermined price and date.

• Swaps involve exchanging cash flows based on different financial instruments.

• Forwards are similar to futures, but are cu...read more

Financial instruments are assets that can be traded. There are two types: cash and derivative instruments.

• Cash instruments include stocks, bonds, and currencies.

• Derivative instruments include options, futures, and swaps.

• Financial assets are recorded on the balance sheet at their fair value.

• Changes in fair value are recorded in the income statement.

• Hedge accounting can be used to reduce volatility in financial statements.

Impairment of assets is the reduction in the value of a company's assets due to various reasons.

• Impairment occurs when the carrying value of an asset exceeds its recoverable amount.

• Journal entry for impairment involves debiting the impairment loss account and crediting the respective asset account.

• Impairment can occur due to physical damage, obsolescence, changes in market conditions, etc.

• Impairment testing is required annually for goodwill and intangible assets with indefini...read more

Deferred revenue is unearned income, accrual is earned but not yet received, prepaid is paid but not yet used, provision is an estimated expense.

• Deferred revenue is money received for goods or services not yet delivered

• Accrual is revenue earned but not yet received

• Prepaid is payment made for goods or services not yet received

• Provision is an estimated expense that has not yet been incurred

• Examples: Deferred revenue - magazine subscriptions, Accrual - interest income, Prepaid -...read more