From time to time debt and equity securities must be

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Unformatted text preview: diate resale. Required: 176.Describe the general accounting procedures for reclassifying securities from one category to another— held to maturity, available for sale, or trading. From time to time, debt and equity securities must be reclassified when conditions and circumstances surrounding the investment change. Required: 177.Evaluate the rationale for these two diverse reporting requirements for equity securities. What arguments could be made to support each treatment? Previously, marketable equity securities were reported using a technique referred to as "lower of cost or market." The current accounting standard requires fair value reporting for trading securities and securities available for sale. Some accountants believe that the FASB was inconsistent when GAAP was issued requiring changes in the value of trading securities to be reported in the income statement and balance sheet, while changes in the value of securities available for sale are reported only in the balance sheet. Required: 178.Discuss the possible rationale behind the losses on securities reported by Maytag in 20X3 and 20X4. During the fourth quarter of 20X4, the Company recorded special charges and loss on securities totaling $17.0 million, or $13.5 million after-tax. Special charges of $9.8 million, or $6.2 million after-tax, were associated with a salaried workforce reduction of approximately 250 employees. Cash expenditures for 20X4 related to this charge were $3.7 million. Loss on securities of $7.2 million resulted from the writedown of the remaining investment in a privately held Internet-related company. During the fourth quarter of 20X3, the Company recorded special charges and loss on securities totaling $57.5 million, or $36.5 million after-tax. Special charges of $39.9 million, or $25.3 million after-tax, were associated with terminated product initiatives, asset write-downs, and executive severance costs related to management changes. Loss on securities of $17.6 million, or $11.2 million after-tax...
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This document was uploaded on 07/05/2013.

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