F3- Marketable Securities and Business Combinations Flashcards
What are examples of things not included under the title of equity securities?
Preferred Stock, treasury stock, and convertible bonds.
Under IFRS, what three ways can marketable securities be classified as?
1) Financial Assets at fair value through profit or loss
- has to meet one of these conditions:
a) Classified as held for trading (equivalent to trading securities under US GAAP)
b) Asset is designated as an investment at FV through profit or loss using the FV option
2) Available for Sale
3) Held-to-maturity
How should Trading and Available for Sale securities be valued?
At Fair Value…they should be marked to market.
Unrealized Gains and Losses on trading securities are included in earnings and shown on the income statement.
Unrealized Gains and losses on AFS securities are reported in OCI.
All realized Gains and Losses go straight to income statement.
How should Held to maturity securities be valued?
Valued at amortized Cost.
Under US GAAP, how is the impairment of a security handled?
If the decline in FV is other than temporary, the cost basis of the individual security is written down to FV as the new cost basis and the amount of the write-down is accounted for as a REALIZED loss and included in income statement.
What do the 3 Basic JE’s for the Equity Method look like?
1) Record Investment:
DR Investment in Investee
CR Cash or Commonstock/APIC
2) Record income from Investee:
DR Investment in Investee
CR Income from Investee
3) Record Parent’s ownership of dividends paid:
DR Cash
CR Investment in Investee
The equity method calls for the amortization of the differential in Asset Fair Value Difference over the life of the asset?
Yes
Is Goodwill or Land amortized under the equity method of accounting?
No, it is also not subject to a separate impairment test than the one done on the whole equity method investment.
