Marketable Securities and Long Term Investments_1

Marketable Securities and Long Term Investments_1 -...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Marketable Securities, Long-Term Investments and Business Combinations The problems of accounting for investments involve measurement, recognition, and disclosure. Investments are generally classified as either debt securities or equity securities. The first section presents accounting for debt securities; the second section covers accounting for equity securities; and the remainder of the chapter presents the equity method of accounting, disclosure requirements, impairments, and accounting for the transfer of investment securities between categories. Debt Securities Debt Securities are instruments representing a creditor relationship with an enterprise. Debt securities include U.S. government securities, municipal securities, corporate bonds, convertible debt, commercial paper, and all securitized debt instruments. Debt securities are grouped into the following three separate categories: a. Held-to-maturity: Debt securities that the enterprise has the positive intent and ability to hold to maturity. b. Trading: Debt securities bought and held primarily for sale in the near term to generate income on short-term price differences. c. Available-for-sale: Debt securities not classified as held-to-maturity or trading securities. Held-to-Maturity Debt Securities Held-to-maturity debt securities are accounted for at amortized cost, not fair value . A Held-to Maturity Securities account is used to indicate the type of debt security purchased. Available-for-Sale Debt Securities Available-for-sale debt securities are reported at fair value . The unrealized gains and losses related to changes in the fair value of available-for-sale debt securities are recorded in an unrealized holding gain or loss account . This account is reported as other comprehensive income and as a separate component of stockholders’ equity until realized . A valuation account called “Securities Fair Value Adjustment (Available-for-Sale)” is used instead of debiting or crediting the Available-for-Sale Securities account to enable the company to maintain a record of its amortized cost.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 5

Marketable Securities and Long Term Investments_1 -...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online