Marketable Securities Flashcards
When an available-for-sale security is determined to be impaired because of an other than temporary decline in fair value below cost,
the asset must be written down to the lower fair value by recording a loss that is recognized on the income statement.
Marketable debt securities, both “long” and “short” term, are reported at
carrying amount (amortized cost) unless there is a permanent decline in market value.
Under IFRS, reversals of impairment losses are allowed and the increase would be booked to
the current year’s income statement.
Trading securities are reported at what on the balance sheet
Fair value on the balance sheet.
Trading securities are reported at fair value, with holding gains and losses included in
earnings
Bond investments which are intended to be held until the maturity date are classified as held-to-maturity securities and are reported at their
amortized cost.
Investments in marketable equity securities which the company does not intend to sell in the near term should be classified as XXX. Unrealized gains and losses on XXX should be reported as a separate component of
available-for-sale and other comprehensive income.
“Available-for-sale equity” securities are carried at fair value. Permanent impairment in value results in a writedown and a charge to
income as if the loss was realized.
Marketable debt securities that the company has the intent and ability to hold to maturity, both “long” and “short” term, are reported at
carrying amount (amortized cost) unless there is a permanent decline in market value.
What should be the effects of the determination that the decline was other than temporary on Kopp’s Year 2 net available-for-sale assets and net income?
This Year 2 entry has no effect on available-for-sale assets and decreases net income by the amount of the realized loss.
Trading securities, both debt and equity, are to be reported at
fair value at the end of the current reporting period.
When an available-for-sale security is determined to be impaired because of an other than temporary decline in fair value below cost,
the asset must be written down to the lower fair value by recording a loss that is recognized on the income statement.
When marketable equity securities are transferred between trading and available-for-sale, the transfer is made at fair value, and the difference (if any) is recorded as
unrealized loss and charged to the income statement. The new carrying amount becomes the basis for any future gain or loss.
