ch17 - CHAPTER 17 Investments LEARNING OBJECTIVES 1....

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CHAPTER 17 Investments LEARNING OBJECTIVES 1. Identify the three categories of debt securities and describe the accounting and reporting treatment for each category. 2. Understand the procedures for discount and premium amortization on bond investments. 3. Identify the categories of equity securities and describe the accounting and reporting treatment for each category. 4. Explain the equity method of accounting and compare it to the fair value method for equity securities. 5. Describe the accounting for the fair value option. 6. Discuss the accounting for impairments of debt and equity investments. 7. Explain why companies report reclassification adjustments. 8. Describe the accounting for transfer of investment securities between categories. *9. Explain who uses derivatives and why. *10. Understand the basic guidelines for accounting for derivatives. *11. Describe the accounting for derivative financial instruments. *12. Explain how to account for a fair value hedge. *13. Explain how to account for a cash flow hedge. *14. Identify special reporting issues related to derivative financial instruments that cause unique accounting problems. *15. Describe the accounting for variable-interest entities. *This material is covered in an Appendix to the chapter.
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CHAPTER REVIEW 1. The problems of accounting for investments involve measurement, recognition, and disclosure. Investments are generally classified as either debt securities or equity securities. Chapter 17 covers both temporary and long-term investments. 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 2. (S.O. 1) 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. *Note: All asterisked (*) items relate to material contained in the Appendix to the chapter. 3. 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 4. 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
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This note was uploaded on 05/26/2011 for the course ACCOUNTING 101 taught by Professor Smith during the Spring '11 term at San Diego State.

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ch17 - CHAPTER 17 Investments LEARNING OBJECTIVES 1....

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