Lecture_Outline-Chapter_Ten

Lecture_Outline-Chapter_Ten - LECTURE OUTLINE MANAGEMENT...

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LECTURE OUTLINE 1 MANAGEMENT 100 CHAPTER 10 FINANCIAL ACCOUNTING Marketable Securities Marketable securities – Stocks, bonds and other financial instruments that organizations hold in lieu of cash. Many rationales for holding this composite of assets exist, including: Earning a higher rate of return than the one available in a bank account. The securities market is usually quite liquid, so such investment can be readily converted into cash. Management of these investments does not require ongoing operational decisions. Rather, just the decision to buy or to sell is necessary. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Coca-Cola Company and Subsidiaries On December 31, 2001 and 2000, available-for-sale and held-to-maturity securities consisted of the following (in millions): Gross Gross Estimated Unrealized Unrealized Fair December 31, Cost Gains Losses Value 2001 Available-for-sale securities Equity securities $ 251 $ 43 $ (116) $ 178 Collateralized mortgage obligations 13 - (1) 12 Other debt securities 19 - - 19 -------------------------------------------------------------------------------- $ 283 $ 43 $ (117) $ 209 ================================================================================ Held-to-maturity securities Bank and corporate debt $ 978 $ - $ - $ 978 Other debt securities 8 - - 8 -------------------------------------------------------------------------------- $ 986 $ - $ - $ 986 ================================================================================ Gross Gross Estimated Unrealized Unrealized Fair December 31, Cost Gains Losses Value 2000 Available-for-sale securities Equity securities $ 248 $ 57 $ (90) $ 215 Collateralized mortgage obligations 25 - (2) 23 Other debt securities 15 - - 15 -------------------------------------------------------------------------------- $ 288 $ 57 $ (92) $ 253 ================================================================================ Held-to-maturity securities Bank and corporate debt $ 1,115 $ - $ - $ 1,115 ------------------------------------------------------------------------------- $ 1,115 $ - $ - $ 1,115 ================================================================================
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MANAGEMENT 100 DANNY S. LITT 2 Treatment of marketable securities for financial statement reporting varies depending upon GAAP classification. These include: 1. Trading – Debt or equity securities the entity intends to use in generating trading profits. 2. Available-for-sale – Debt or equity securities that are neither “trading” nor “held-to-maturity.” 3. Held-to-maturity – Debt securities the entity intends to hold for their full term. Merrill Lynch’s marketable securities, are primarily available-for-sale, as shown below: ($’s in millions) 2001 % 2000 % Available-for-sale $70,320 90 $48,483 99 Held-to-maturity 7,460 10 632 1 Trading 40 136 Total $77,820 100 $49,251 100 Debt Securities – Bonds Debt investments are investments in government and corporation bonds. At acquisition, the cost
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Lecture_Outline-Chapter_Ten - LECTURE OUTLINE MANAGEMENT...

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