Fvptl investments are initially reported at fair

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management to be sold within one year. FVPTL investments are initially reported at fair value and subsequently revalued at fair value at each reporting date. The unrealized gains and losses are reported in net income along with dividends received or receivable. Available-for-sale investments are classified as current or noncurrent assets depending on how long company managers intend to hold on to these shares. These investments are initially reported at fair value and subsequently revalued at fair value at each reporting date, with one exception. If fair value cannot be reliably measured, these investments will be reported using the cost method. When these shares are valued at fair value, the unrealized gains and losses are reported in other comprehen- sive income. When the investment is sold, the previously reported unrealized gains and losses will be removed from other comprehensive income and realized gains and losses will be reported in net income. Dividends are recorded as income when they are declared. An SPE must be consolidated when the reporting entity has control of the SPE. Unrealized gains/losses are reported in net income for FVTPL investments. Unrealized gains/losses are reported in other comprehensive income for available-for-sale investments.
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46 CHAPTER 2 INVESTMENTS IN EQUITY SECURITIES There are two options for reporting other comprehensive income. Under the first option, all items of income and expense are reported in a single statement of com- prehensive income; the other comprehensive income items are reported separately at the bottom of this statement after net income. Under the second option, two sepa- rate statements are prepared. The first statement, typically called the income state- ment, displays the components of net income. The second statement, typically called the statement of comprehensive income, starts with net income from the income statements and then displays the different components of other comprehensive income. Both options end up showing comprehensive income as the last line on the statement. In either case, net income is added to retained earnings as in the past and other comprehensive income is added to cumulative other comprehensive income. Retained earnings and each class of cumulative other comprehensive income must be reported as separate components of shareholders’ equity. We will illustrate the presentation of other comprehensive income and the components of shareholders’ equity in Chapters 10 and 11. Investments Not Valued at Fair Value When investments are not reported at fair value, they are usually reported using the cost method or the equity method. The next two subsections describe when these methods are used and illustrate how to apply them. Cost Method of Reporting on Equity Investment The cost method is used under IFRSs in the following situations: • For available-for-sale investments when the market price in an active market is not available and fair value is not reliably measurable. This requirement is
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  • Fall '12
  • Smith
  • Balance Sheet, Comprehensive income, Generally Accepted Accounting Principles, hiL01537_ch02_039-070.indd Page

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