Trading either of the other include in current net

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Unformatted text preview: eriod. Trading Either of the other Include in current net income any unrealized gain or loss that occurred in the current period prior to the transfer. (Unrealized gains and losses that occurred in prior periods already were included in net income in those periods.) Held-to-maturity Available-for-sale No current income effect. Report total unrealized Available-for-sale Held-to-maturity gain or loss as a separate component of shareholders’ equity (in AOCI No current income effect. Don’t write off any existing unrealized holding gain or loss in AOCI, but amortize it to net income over the remaining life of the security (fair value amount becomes the security’s amortized cost basis). 12-22 Impairment of Investments Occasionally, an Occasionally, investment’s value will decline for reasons that are other-thantemporary (OTT). temporary For HTM and AFS investments, a company recognizes an OTT impairment loss in earnings. Determining an “other than temporary” decline for debt securities can be quite complex. For both equity and debt investments, after an OTT impairment is recognized, the ordinary treatment of unrealized gains and losses is resumed. Financial Statement Presentation and Disclosure Aggregate Fair Value Gross realized & unrealized holding gains & losses Maturities of debt securities Amortized cost basis by major security type Change in net unrealized holding gains and losses Inputs to fair value estimates 12-23 12-24 Investor Has Significant Influence Reporting C ategories for Investments Control Characteristics of the Investment Reporting Method Used by the Investor The investor lackssignificant influence over t he operating and financial policies of the investee: Investment in debt securities for which the investor Held-to-maturity (HTM) - investment reported at has the "positive intent and ability" to hold to amortized cost.* maturity. Investment held in an active trading account. Trading securities (TS) - investment reported at fair value with unrealized holding gains and losses included in net income. Other. Securities available-for-sale (AFS) - investment r eported at fair value with unrealized holding gains and losses excluded from net income and reported in Other C omprehensive income.* The investor hassignificant influence over t he operating and financial policies of the investee: Typically the investor owns between 20% and 50% Equity method - investment cost adjusted for of the voting stock of the investee. subsequent earnings and dividends of the investee.* The investor controls the investee: The investor owns more than 50% of the voting C onsolidation - t he financial statements of the investor stock of the investee. and investee are combined as if they are a single company. * If the investor elects the fair value option, this type of investment also can be accounted for using the same approach that's used for t rading securities, with the investment reported at fair value and unrealized holding ga...
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