F5

Question 1

Trading Securities

Answer 1

• intended for active trading within 12 months at least
• portfolio is carried at cost and reported at FV in FS using unrealized gains(losses) on IS

Question 2

Available-for-sale (AFS) Securities

Answer 2

• carried at cost and reported at FV in FS
• credit loss = amortized cost > FV
• any other unrealized loss or gain s/b reported in OCI on BS

Question 3

Held-to-maturity (HTM)

Answer 3

• investor must have ability and intention to hold to maturity
• reported in FS at amortized cost
• it is probable that amt due will not be paid the investment should be reported at PV of amt to be collected
• credit loss = amortized cost > PV of collections

Question 4

Realized gains(losses) are recognized in

Answer 4

• NI when a debt security is sold and HTM and AFS securities are impaired

Question 5

Dividend revenue, under the fair value method, should be recognized to the extent of

Answer 5

• cumulative earnings since acquisition and return of capital beyond that point.
• in other words, the portion of the dividends received this year that were NOT in excess of the investor’s share of investee’s undistributed earnings since the date of investment s/b reported in the investors IS

Question 6

Excluded from the fair value option are

Answer 6

• investments in subsidiaries, pension benefit assets/liabilities and assets and liabilities recognized under leases

Question 7

Disclosures about ____ risks are required in the notes for most FS

Answer 7

• concentration of credit risk
• NOT market risk

Question 8

Equity securities are generally reported at

Answer 8

• at fair value through net income (FVTNI)
• Unrealized holding gains and losses on equity securities are included in earnings as they occur