F3-NOTES Flashcards
What are trading securities?
Trading securities are those securities (both debt and equity) that are bought and held principally for the purpose of selling them in the near term.
“Current Assets”
What are available for sale securities
AFS securities are those securities (both debt and equity) not meeting the definitions of the other two classifications (trading or held to maturity). Securities classified as available for sale sec are reported as either current assets or noncurrent assets, depending on the intent of the corporation.
“GR: Noncurrent Assets”
What are held to maturity securities?
(debt securities only)
Investment in debt securities are classified as held to maturity sec only if the corporation has the positive intent and ability to hold these securities to maturity
“Noncurrent asset”
What are equity securities?
Equity securities are defined as securities that represent an ownership interest in an enterprise or the right to acquire or dispose of an ownership interest in an enterprise at fixed or determinable prices. (stocks and bonds)
Under IFRS-
marketable security investments can be classified as follows:
- Fiancial assets at FV throught profit and loss
- AFS security
- Held to Maturity
What securities are reported at FV
Trading and AFS
Held to Maturity securities are valued at
amortized cost
Where are unrealized gains and losses on trading securities reported?
Earnings (I/S)
Where are unrealized g/l on AFS sec reported?
OCI
Reclassification:
- From Trading Category
- To trading category
- Debt Sec classified as Held To Maturity transferred to AFS sec
- Debt security classifed as AFS transferred to Held to maturity
- It has already been recognized in income so no adj is necessary
- Recognized in current earnings
- Record in OCI
- Amortize gain or loss from OCI with any bond premiom/discount amortization
How are impairment of securities handled?
Under GAAP-if the delcine 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 earnings (I/S)
How is a sale of a security handled?
A sale of a security from any category results in a realized g/l and is reported on the I/S for the period.
“=I/S”
What are the income tax effects of securities?
Tax effects of unrealized g/l entering into the determination of net income must be reflected in the computation of deferred income taxes, b/c unrealized g/l are not deductible for tax purpose
When the control is with the owners- do you consolidate?
No
Can companies with different year ends consolidate?
Yes
