FAR Ch 3 - FAR Notes Chapter 3 http/cpacfa.blogspot.com...

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FAR - Notes Chapter 3 http://cpacfa.blogspot.com Marketable Securities Securities should be classified into one of three categories 1. Trading Securities – securities (both debt and equity) bought and held for the purpose to sell them soon 2. Available for sale – securities (both debt and equity) that does not meet the definition of the other two - reported as either current or non-current asset, depending on the intent of the corporation 3. Held to Maturity Securities – debt securities that the corp intends to hold until maturity - reported as current if matures within 1 yr; non-current if matures in more than a yr - stocks don’t mature, so only debt securities are classified as this Trading and available for sale are reported at fair value (mark to market) Unrealized gain/losses on trading securities are included in earnings; I DEA; operating cash flow Unrealized loss on trading securities xx Valuation Account xx Unrealized g/l on available for sale are reported in other comprehensive income; P U FE; investing cash flow Unrealized loss on available for sale securities xx Valuation Account xx Reclassification; transfer of security from one group to another From To Adjustment Trading Any other no adjustment necessary (already recognized in income) Any other Trading Recognize in income immediately Avail for Sale (debt) Held to Mat unrealized g/l is amortized over the remaining life of debt Held to Mat (debt) Avail for Sale unrealized g/l at transfer date shall be reported in P U FE If there is a permanent decline in fair value, write down as impairment of asset and record as realized loss in current earnings I DEA A sale of security from any category results in a realized gain/loss and is reported in current income Cash xx Trading security xx Realized gain xx ( I DEA) Cash xx Unrealized gain on Avail for sale xx (P U FE) Avail for sale security xx Realized gain on Avail for sale xx ( I DEA) Unrealized gain/losses care not tax deductible and therefore cause a temporary difference Business Combinations/Consolidations
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This note was uploaded on 05/11/2010 for the course CPA 2010 taught by Professor ?? during the Spring '10 term at Becker College.

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FAR Ch 3 - FAR Notes Chapter 3 http/cpacfa.blogspot.com...

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