ADMS 3585 Winter 2010 - Chapter 9 - Part I

ADMS 3585 Winter 2010 - Chapter 9 - Part I - at11am2pm...

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Important Announcements Exam 2  information  has been posted under  the link “Exam information” Change in TIME for the Exam -  March 7   at 11 am -2 pm Accomodation made for those taking the TTC LOCATIONS ARE POSTED ON THE WEBSITE DEFERED STUDENTS With valid document, you could defer either  exam 1 or exam 2 to the final; but there is no  way for you to defer both of them to the final
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AGENDA 1. INVENTORY CHAPTER Completion of topics Practice Questions 2. 1. Midterm Composition (MCQs, exercise/problems  2. Practice question 3. Start on Chapter 9 – Part I
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C H A P T E R 9 9 Investments
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Recent Changes  (For-Your-Information Only) Three new Handbook sections substantially  harmonized Canadian standards with FASB  and IASB Section 1530-Comprehensive Income Section 3855-Financial Instruments- Recognition and Measurement Section 3865-Hedges Above sections all effective in  October 2006 Section 3862-Financial Instruments- Disclosure; effective  October 2007
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Chapter Outline  Classification of investments Accounting for investments HTM : debt investment only HFT : debt and equity investment AFS : debt and equity investment Strategic investment : equity investment  only
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Chapter Outline (Cont’d) Accounting and reporting issues Initial recognition Income and dividend revenue Balance sheet date valuation Fair value, cost, or amortized cost Impairment of investment Other Transfer between categories  Differential reporting Financial statement presentation
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Classification Classified by investment purpose  ( Why  invest?) Passive investment  – to obtain interest income,  dividends, and/or capital gains Held-for-trading (HFT): intend to sell shortly* Held-to-maturity (HTM): intend and be able to hold to  maturity Available-for-sale (AFS): a catch-all category Strategic investment  – to exert influence or control Significant influence but no control: “associates” Control: “subsidiaries” * Fair value option allows firms to classify securities as  HFT even if the intention is to sell beyond 1 year.  
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Classification (Cont’d) Classified by relationship with the other party  Debt investment – investor is creditor  HTM, HFT and AFS (all passive)  Equity investment – investor is owner  Passive: HFT and AFS  - How about HTM? Strategic: Significant influence or control
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