Marketable Securities

Question 1

equity securities

Answer 1

represent ownership interest (stocks) or

right to acquire/dispose of ownership interest (stock warrants/rights, call/put options)

at fixed/determinable prices

Question 2

trading securities

Answer 2

debt and equity securities bought and held for purpose of selling them in near term

reported as current assets

Question 3

available for sale securities

Answer 3

debt and equity securities not classified as trading or held-to-maturity

gr: non current asset but also depends on intent of corp

Question 4

held to maturity securities

Answer 4

debt securities held with intent and ability to hold to maturity

gr: non current asset but also depends on time to maturity

Question 5

trading securities

valuation

Answer 5

unrealized gain/loss reported at FV on I/S (P&L)

realized gain/loss reported on I/S when sold

Question 6

available for sale securities

valuation

Answer 6

unrealized gain/loss reported at FV in OCI

realized gain/loss reported on I/S (out of AOCI) if impaired

Question 7

held to maturity securities

valuation

Answer 7

valued at amortized cost

Question 8

reclassifications

Answer 8

transfers from one group to another are accounted for at FV

Question 9

from trading

Answer 9

no reversal needed

unrealized gain/loss already recognized on I/S

Question 10

to trading

Answer 10

unrealized gain/loss recognized on I/S at date of transfer

Question 11

from HTM to AFS

Answer 11

unrealized gain/loss recognized on OCI at date of transfer

revalued from amortized cost to FV (?)

Question 12

from AFS to HTM

Answer 12

unrealized gain/loss already recognized on OCI

amortize into I/S any gain/loss that was in OCI

Question 13

impairment of securities

Answer 13

• if decline in value is permanent, cost basis is written down to FV as new cost basis
• reported as realized loss on I/S

subsequent changes in FV:

• AFS: recognize on OCI
• HTM: not recognized

Question 14

instruments to hedge trading securities

Answer 14

gains/losses reported on I/S

Question 15

instruments to hedge AFS securities

Answer 15

gains/losses reported on I/S

Question 16

income tax effects

Answer 16

income tax expense when sold plus any deferred taxes for unrealized gain/loss

Question 17

required disclosures

Answer 17

• aggregate FV
• gross unrealized holding gain/loss
• amortized cost basis
• info about contractual maturities of debt securities

Question 18

unrealized loss on OCI

Answer 18

DR to “book loss”

CR to “take out”

Question 19

impairment loss reversal under IFRS

Answer 19

recognize reversal on I/S