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Unformatted text preview: enthetically on a single line that includes the total amount of significant-influence investment or on a separate line. As with trading
securities, unrealized gains and losses are included in earnings in the period in which they occur.
188. Investments in debt securities are classified as either "Amortized Cost" or FVTPL ("Fair Value through Profit & Loss"). Debt in the
amortized cost classification is accounted for at amortized cost, so unrealized gains and losses are not recognized (unless an other-than-temporary
impairment is recognized). To be included in the amortized cost category, a debt investment has to meet both (a) the "cash flow characteristics"
test (which requires that the debt instrument consist of only principal and interest payments) and (b) the "business model test" (which requires that
the objective of the company's business model is to hold the investment to collect the contractual cash flows rather than to sell the investment at
a gain). If debt isn't classified in "amortized cost," it is classified in FVTPL, and unrealized gains and losses are recognized as soon as they occur,
similar to accounting for trading securities under U.S. GAAP. 189. Investments in equity securities are classified as either "FVTPL" ("Fair Value through Profit & Loss") or "FVTOCI" ("Fair Value through
Other Comprehensive Income). If the equity is held for trading, it must be classified as FVTPL, but otherwise the company can irrevocably elect
to classify it as FVTOCI. Under FVTPL, unrealized gains and losses are recognized as soon as they occur, similar to accounting for trading
securities under U.S. GAAP. Under FVTOCI, unrealized gains and losses are included in OCI, similar to AFS accounting under U.S. GAAP.
However, unlike AFS, realized gains and losses are not reclassified out of OCI and into net income when the investment is later sold. Rather, the
accumulated gain or loss associated with a sold investment is just transferred from AOCI to retained earnings (both shareholders' equity accounts),
without passing through the income statement. 190. 191. ch12 Summary
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This document was uploaded on 07/05/2013.
- Spring '09
- Balance Sheet