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Flashcards in No Significant Influence Deck (23):

At what cost are held-to-maturity securities carried and reported?

At amortized cost


What investments are classified as available-for-sale?

Any debt or equity investments not classified as either Held-to-Maturity or Held-for-Trading. The Available-for-Sale category is the default category if an investment in debt or equity does not meet the requirements of either Held-to-Maturity or Held-for-Trading


Where are held-to-maturity investments reported on the statement of cash flows?

Investing Activity


Where are unrealized holding gains and losses on investments held-for-trading reported?

In income (Income Statement) as part of Income from Continuing Operations.


What method is used to amortize a premium or discount on a security?

Effective interest method or straight-line method if not materially different.


What amounts are included in a gain or loss recognized on the sale of an available-for-sale investment?

The gain or loss recognized on the sale of an available-for-sale investment includes:
1.)The difference between the carrying value of the investment and its selling price; and
2.)Any unrealized gain or loss in Accumulated Other Comprehensive Income related to the securities sold.


What amounts should be included in the initial recording of a held-for-trading investment?

Purchase price of security;
Directly related cost of acquisition, e.g., brokerage fee, transfer fee, etc.


List the criteria for held-for-trading securities

1.)Applies to investments in Debt and Equity;
2.)Investor buys for the purpose of selling in the near term w/ the objective of generating profits on short term price changes


How are held-for-trading investments carried and reported?

At fair value, with changes in fair value reported in current income. For debt securities recognize periodic interest income and for equity, recognize dividends received as income


Under what conditions can a debt security sold before maturity be considered held to maturity?

Under what conditions can a debt security sold before maturity be considered held to maturity?


How is interest earned on held-to-maturity investments reported in the income statement?

As an Other Income item in the income statement.


What amounts should be included in the initial recording of a held-to-maturity investment?

1.)Purchase price of security;
2.)Directly related cost of acquisition, e.g., brokerage fee, transfer fee, etc.;
3.)Accrued interest, if any, is not included in the cost of the investment.


How are available-for-sale investments accounted for and reported in financial statements?

1.)Recognize interest income (one debt securities)/dividends (on equity securities);
2.)Amortize discount or premium, if any, on debt securities;
3.)Adjust investment to fair value at balance sheet date with any gain/loss reported as an item of other comprehensive income


How are available-for-sale investments reported in the balance sheet?

At fair value (i.e., original cost +/- allowance to adjust to fair value) as either current or non-current asset (based on entity's policy).


List the criteria for a held-to-maturity classification.

1.)Debt security;
2.)Investor has intent to hold to maturity;
3.)Investor has ability to hold to maturity


What is the carrying value of an investment that is determined to be "available for sale?"

It is the FV. Difference between FV and carrying value before revaluation is booked as a loss


What is the process for determining if there has been a decline in fair value below amortized cost (debt) or cost (equity) and it is other than temporary

1.) Determine if the FV of an investment is less than its amortized cost; if so, the investment is impaired.
2.) Determine if the impairment is other than temporary


If an investment is impaired and it is other than temporary what presentational items must be addressed?

1.) An impairment loss equal to the difference between the investments cost and its FV recognized in current income
2.) FV becomes new cost basis of investment
3.) Subsequent recoveries in FV would not be recognized


Generally, will Available-for-sale investments be classified as current or non-current assets?

Generally non-current. Those within one year of disposal will be classified as current


What are the steps in determining Gain/Loss upon disposition of Available-for-sale investments?

1.) If debt security, first recognize interest income and amortization of premium/discount to date
2.) Determine carrying value of investment (Debt and Equity = FV)
3.) Recognize gain or loss at date of sale, if any, as difference between sales price and carrying value
4.) Any related unrealized (holding) gain or loss that is in AOCI is recognized in income.


Changes in which type of security go into earnings?



Change in which type of investment (classification) go into OCI?

Available for sale securities


What are the 3 types of accounting for investments where an investor does not have significant control?

1.) Held to Maturity (Debt) - Amortized Cost
2.) Trading - Unrealized gains in earnings and shown as operating cash flow
3.) Available for Sale - Unrealized gains in OCI, reverse when sold.

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