Investments Flashcards
How are Available-For-Sale securities recorded on the Balance Sheet?
At Fair value as either Current or Non-current assets.
How are Available-For-Sale security Unrealized G/L treated?
Included in OCI (Other Comprehensive Income)
How are Unrealized G/L for Available-For-Sale securities that are reclassified to Held-to-Maturity or Trading Securities treated?
HTM - Stockholder’s Equity
/ Trading Securities - Current Period.
How are Held-to-Maturity securities recorded on the Balance Sheet?
Amortized cost as Current or Non-current assets.
If reclassified as AFS - Unrealized G/L go to Stockholder’s Equity
If reclassified as Trading Securities - Unrealized G/L recognized in Current Period
How are Held-to-Maturity securities Unrealized G/L treated?
Trick question - Unrealized gains or losses are not applicable because they are HTM
How are Trading Securities recorded on the Balance Sheet?
At Fair Value as a Current Asset
Unrealized gains/losses are recorded on the Income Statement
If they are reclassified as held-to-maturity or available-for-sale- there is no effect upon transfer.
How are Trading Securities Unrealized G/L treated?
Recorded on the Income Statement
If they are reclassified as HTM or AFS - there is no effect upon transfer.
Define a debt security
A debt security represents a creditor relationship w/ the issuer.
- Includes mandatorily redeemable preferred stock collateralized morage obligations.
- It excludes leases, options, financial futures contracts, and forward contracts
Define an Equity Security
An equity security is an ownership interest in an entity or a right to acquire or dispose of such an interest.
How are equity securities measured when there is no determinable fair value?
When quoted market prices are unavailable, they are measured using the COST METHOD.
