Class 7_Cash Flow_student-filled in

Class 7_Cash Flow_student-filled in -...

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Intermediate Accounting – Chapter 22 1 Investments face a major change in IFRS and PE accounting. Includes ch 4 , ch 5 and ch 22 Understanding Investments Financial Assets and Investments Cash equivalent- investments that are less than 3 months maturity CURRENT Trading security – shares that company invests to buy and sell CURRENT Temporary Investments – investments that has a duration of past 3 months to 12 months CURRENT Debt instruments Investments in government securities, municipal securities, corporate bonds, convertible debt, and commercial paper. More LONG TERM Equity instruments represent ownership interest, such as common, preferred, or other capital stock. Cumulative preferred A company may also invest for strategic reasons. Strategic investments are entered into to give the investing company ( the investor) significant influence or control over the operating, investing, or financing decisions of the company in which it has invested (the investee ). In the Investment section long term Accounting for the investments depends on the type of instrument (debt or equity), management’s intent, the ability to reliably measure fair value, or the extent to which a company can influence the activities of the investee company. Initial Investment: Initial Investment purchase – record investment at price paid. Initial Transaction costs – If cost value used expense these if fair value is used. Add these costs to the Investment initial value Changes with each approach Subsequent investment: Any change in fair value carrying – Called unrealized holding gains or losses. Three Models: a. Cost/amortized cost model . Does not appear in Other comprehensive income ch 4 Measured at cost on acquisition (equal to fair value + transaction costs) At each reporting date, measure at cost or amortized cost Unrealized holding gains or losses are not applicable Realized holding gains and losses are reported in net income
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Intermediate Accounting – Chapter 22 2 b. Fair value through net income model (FV-NI). Measured at fair value on acquisition At each reporting date, measure at fair value Unrealized holding gains or losses reported in net income Realized holding gains and losses are reported in net income Means that investments are reported at FV or market value and the increase or decrease belongs to NET INCOME Example: Trading securities c. Fair value through other comprehensive income model (FV-OCI). Related to Ch 4 and ch 5 Investments Measured at fair value on acquisition At each reporting date, measure at fair value Unrealized holding gains or losses reported in other comprehensive income (OCI) Realized holding gains and losses are transferred to net income or directly to net income Class Exercise 9-8 For understanding only – to be used with ch 4 and ch 5 Net income model –assume trading securities (a) Investments . .............................................................................. 3,000
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This note was uploaded on 01/17/2012 for the course ACCOUNTING 310 taught by Professor Ily during the Spring '11 term at Concordia Canada.

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Class 7_Cash Flow_student-filled in -...

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