investment - OVERVIEW OF ACCOUNTING FOR INVESTMENTS I....

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon
OVERVIEW OF ACCOUNTING FOR INVESTMENTS II. ACCOUNTING FOR DEBT INVESTMENTS III. ACCOUNTING FOR EQUITY INVESTMENTS IV. PRIVATE ENTITY GAAP V. IMPAIRMENT VI. PRE-2011 GAAP
Background image of page 1

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

View Full DocumentRight Arrow Icon
a) a) FINANCIAL ASSET (FA) 1) Cash 2) An equity instrument of another entity or 3) Contractual right (i) to receive cash or FA or (ii) to exchange FA or FL under potentially favorable cond’ns b) FAIR MARKET VALUE (FMV) 1) Exit price that would be received/paid to sell asset/transfer liab at measurement date in an orderly fashion 2) Market based (more objective), not entity specific 3) At acquisition, HC = FMV 4) If no active mkt, use valuation technique (eg. option pricing model or counted cash flow) c) HOLDING GAINS/ LOSSES (HG/HL) Gains/losses due to changes in value of assets Over life of asset: FMV – cost For the period: FMV – carrying value realized - when asset is sold (exchange transaction)
Background image of page 2
unrealized - if asset is still held d) OTHER COMPREHENSIVE INCOME (OCI) Gains/ gains or losses during period that actg stds require be recognized in comprehensive income, but not reported in current year’s NI e) ACCUMULATED OTHER COMPREHENSIVE INCOME (AOCI) Balance of all past charges and credits to OCI recognized on B/S but which are not included in R/E
Background image of page 3

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

View Full DocumentRight Arrow Icon
II. ACTG FOR DEBT INVESTMENTS Actg mismatch if effect will not represent underlying econ situation p.553 IASB recommendations (required after 2012 & can be adopted now) Actg mismatch if effect will not represent underlying econ situation p.553
Background image of page 4
Does investment have contractual cash flows of principal & interest? YES NO FV-NI METHOD Is portfolio managed on contractual yield basis? Business model objective is to collect cash from principal & interest (not from sale). NO YES Will amortized cost result in an accounting mismatch? NO YES AMORTIZED COST METHOD
Background image of page 5

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

View Full DocumentRight Arrow Icon
Background image of page 6
COMPARE ACTG METHODS FOR DEBT INVESTMENTS Amortized Cost Method FV-NI ( int shown separately ) FV-NI ( int NOT shown separately ) Amount to record at acquisition? Treatment of transaction costs? Cost = FMV (of debt or what was given to get it) CAPITALIZE Cost = FMV (of debt or what was given to acquire it) EXPENSE Cost = FMV (of debt or what was given to acquire it) EXPENSE Classify as current or noncurrent? Noncurrent (unless matures in 1 yr) Either Either Amortize premium or discount? YES EFFECTIVE INT METHOD Same as amortized cost NO How do we compute interest income? ACCRUE betw int dates NBV x eff rate (acquis rate) NBV value = PV @ eff rate Same as amortized cost ACCRUE betw int dates Stated rate x face value Do we adjust to FMV at the end of each period? NO
Background image of page 7

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

View Full DocumentRight Arrow Icon
Image of page 8
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/16/2011 for the course ACTG 1P71 taught by Professor Maccn during the Spring '09 term at Brock University.

Page1 / 20

investment - OVERVIEW OF ACCOUNTING FOR INVESTMENTS I....

This preview shows document pages 1 - 8. Sign up to view the full document.

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