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Class 9.1 Slides_Investments (1).pptx

Class 9.1 Slides_Investments (1).pptx - A310 Class 9.1...

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A310 Class 9.1: Introduction to Accounting for Investments (Ch 12)
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INVESTMENTS Financial instruments: Purchased by individual investors, mutual funds, and corporations Objective : To earn a return from the dividends or interest the securities pay or from increases in the market prices of the securities To develop ongoing affiliations with the companies whose securities are acquired Equity securities Debt securities Common stock Preferred stock Bonds Notes
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Critical events that an investor experiences in the life of an investment Purchasing the investment Recognizing investment revenue For debt: Interest For equity: Dividends Holding the investment during periods in which the investment’s fair value changes Unrealized holding gains and losses Selling the investment
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ACCOUNTING FOR DEBT INVESTMENTS Debt Security Specified date when it matures Face amount paid to investors on maturity In the meantime, interest paid to investors
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HELD-TO- MATURITY
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DEBT INVESTMENTS - HTM Investor has the “positive intent and ability” to hold the securities to maturity Securities mature Maturity date Principal Also called the face amount Paid to investors Interest paid to investors Interest dates
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