Lecture16_MS_Blackboard

Lecture16_MS_Blackboard - Accounting for Investments •...

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Unformatted text preview: Accounting for Investments • What is the difference between ST and LT- Investments? • How do earnings and assets differ under the cost vs. equity method of accounting for LT investments? • When are accounts of affiliates consolidated with that of the parent company? Marketable vs Investment Securities • Firms acquire marketable securities for: 1. Liquidity management 2. Yield 3. Trading profit 4. The short-term • Firms acquire investment securities for: 1. Financial returns 2. Financial control 3. The long-term Marketable Securities Traded in the US Money Markets US Treasury Securities US Government Agency Securities Securities of States and Political Subdivisions Bankers Acceptances Commercial Paper Certificates of Deposit Equity securities Corporate Bonds Mortgage Backed Securities Use Accounting Measurement Held to maturity Amortized cost Available for sale Marked to market with unrealized gains & losses taken to owners’ equity. Traded Marked to market with unrealized gains & losses taken to income. Accounting for Held to Maturity Securities • Held to maturity securities are measured so as to provide a constant return on the investment. • It involves the amortization of any premium or discount on the security. • This involves calculating the yield on the security which differs from the coupon rate of return. • The coupon rate is the rate of interest stated on the face of the security and is the cash amount of interest to be received. Synonyms for the coupon rate are the stated rate, the nominal rate, or the contractual rate of interest.rate of interest....
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This note was uploaded on 05/24/2008 for the course ACC 203 taught by Professor Choi during the Spring '08 term at NYU.

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Lecture16_MS_Blackboard - Accounting for Investments •...

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