Investments Flashcards
How are Trading, Available for Sale, and Held to Maturity securities carried on the balance sheet at year end? How are their gains and losses reported?
If the FV option is elected, how does that change treatment of all marketable debt securities as opposed to regular treatment (no election)
- AFS and HTM g/l’s are reported in income statement
- HTM is reported on BS at FV
What is the equity method and how does the investor record its investments
**Investor has ability to significantly influence, holding 20-50% of voting stock. **
1) records investment initially at cost
2) Adjusts investment based on ownership % of investees net income. g/l’s go on IS
3) Reduces investment for dividends based on ownership %
Formulas to solve unrealized gain/loss on bonds with accrued interest.
Valuation Allowance - Key Concepts
What are the key concepts of market risk vs credit risk.
Which items for AFS securities go to Net Income and which go to OCI? (6)
What are the key characteristics of Held-to-Maturity (HTM) debt securities? (5)
How are equity securities with less than 20% ownership reported on the financial statements?
How do you calculate the historical cost of available-for-sale (AFS) debt securities given fair value, credit loss, unrealized gains, and unrealized losses?
How do you calculate the income or loss from an investment in equity securities (less than 20% ownership) when dividends and unrealized gains or losses are involved?
How do you calculate the adjustment to the valuation allowance for available-for-sale (AFS) securities?
What are the Influence levels and name of accounting methods for stock investments not measured at fair value (FV) for ownership levels < 20%, 20% to 50%, and > 50%?
What disclosures are required when using the equity method for stock investments (20% to 50% ownership)?
How do you calculate goodwill for an investment accounted for using the equity method?
What are the key rules for applying the equity method, and how do recognizing income and dividends affect financial statements?
How does owning preferred stock affect influence, dividends, and net income?
In investment context , How do you calculate the carrying value of bonds using the effective interest method?
How to calculate the gain from selling stock rights:
How are PPE and inventory fair value adjustments treated under the equity method
