STAY Focused II Flashcards
WHERE are Unrealized gains and losses on trading securities recognized?
In “Net Income” in the period of the change
HOW are Investments in Available-for-Sale securities reported?
AT market value with increases or decreases reported in Other Comprehensive Income (OCI)
NOTE: OCI is reported on the Balance Sheet
HOW are Available-for-Sale Marketable Securities classified (reported)?
AT their fair market values with the difference between FMV and Cost reported in a valuation account
WHEN is a Gain or Loss “Realized?”
WHEN an asset is disposed of
Note: A change in fair value, however, results in an unrealized gain or loss
WHERE are Unrealized Gains and Losses on Trading Securities reported?
In “Income” on the Income Statement (I/S)
WHERE are Unrealized Gains and Losses on Available-for-Sale securities reported?
In “Other Comprehensive Income”
i.e. This is a Balance Sheet account
WHAT happens when an investment in a debt security is reclassified from available for sale (AFS) to held to maturity (HTM)?
THE transfer occurs at its market value on the date of transfer
WHAT are some financial instruments required by U.S. GAAP to be reported at fair value in the company’s financial statements?
Stock options held as an investment
Derivatives
Assets acquired/ Liabilities assumed
Business combinations reported as acquisitions
Reporting of assets after recognition of an impairment loss
HOW are Investments in trading securities reported?
AT their fair values as of the balance sheet date
HOW are Investments in bonds that will be held to maturity reported?
THEY are originally recorded at cost
NOTE: Any discount or premium is amortized adjusting the carrying value of the bonds to the amortized cost
WHAT type of Marketable Security is a marketable equity security that an entity “does not intend to sell in the near term?”
THIS is an Available-For-Sale security
And it is reported as an separate component of “Other Comprehensive Income”
On the Balance Sheet (B/S)
HOW are unrealized gains or losses recognized for an Available-For-Sale Marketable security?
BY increasing or decreasing the carrying value of the investment, respectively, with the use of a valuation allowance account
AND
Recognizing the corresponding amount in “Other Comprehensive Income”
HOW are available-for-sale securities that experience a loss that are considered “other than temporary” (permanent) treated?
IT must be written down to a new cost basis and is treated as a “realized loss”
Are Leases allowed to use the Fair Value Option?
NO.
ASC 825-10-15-5(d) excludes leases from eligibility for the fair value option
WHAT are the qualifications for an item to qualify for recognition in the financial statements of a company under GAAP?
IT MUST:
(1) Be measurable with reasonable reliability
(2) Be relevant to users
(3) Be based on information that is representationally faithful, verifiable, and neutral
