3-Investments In Debt & Equity Securities Flashcards
Trading securities- B/S
Usually current
Fair value
Trading securities - I/S
*Unrealized gains/losses
Realized gain/loss
Interest income
AFS securities - B/S
Current/noncurrent
Fair value
Amortized cost & allowance for credit losses
*unrealized gains/losses(other than credit losses) in OCI (statement of comprehensive income) & accumulated OCI in stockholders equity (separately)
AFS securities - I/S
Credit loss expense/reversal
Realized gain/loss
Interest income
HTM securities - B/S
Noncurrent/current
Amortized cost
Allowance for credit losses (separately)
HTM securities - I/S
Credit loss expense/reversal
Realized gain/loss
Interest income
Unrealized gains & losses reported in net income
Trading securities
Unrealized gains & losses reported in OCI
AFS
Reclassification between trading and afs
Reclassify at fair value
Difference is treated as realized gain/loss on income statement
Reclassification between htm and afs
Reclassify at fair value
If HTM to afs then record unrealized gain/loss in OCI
If afs to HTM then any unrealized gain or loss is recognized in OCI transferred for the b/s in aoci and amortized over the remaining life
Fair value option
An entity values various eligible items at fair value at election dates. Once fair value option is elected it is irrevocable
Method used when investor has ability to exercise significant influence over operating and financial policies of the invested: 20-50%
Equity method
Equity method
Initially recorded at cost
Investor reports portion of investees earnings as equity in earnings
Dividends are recorded as a reduction in the investment account
To record depreciation of excess between bv and purchase price debit equity in earnings and credit investment
Adjusted cost method (0-20%)
Required to elect method
No entry for earnings is recorded
Dividends received are recorded as dividend income
No entry for depreciation of excess cost
