中级财会ch14.pptVIP

Objectives 1. Explain the classification and valuation of investments. 2. Account for investments in debt and equity trading securities. 3. Account for investments in available-for-sale debt and equity securities. 4. Account for investments in held-to-maturity debt securities, including amortization of bond premiums and discounts. Classification of Investments 1) Trading securities 2) Available-for-sale securities 3) Held-to-maturity debt securities Accounting for Investments Investments in Available-for-Sale Debt and Equity Securities The investment is initially recorded at cost. It is subsequently reported at fair value. Unrealized holding gains and losses are reported as a component of other comprehensive income. Interest and dividend revenue, as well as realized gains and losses on sales, are included in net income for the current period. Sale of Available-for-Sale Securities Investments in Held-to-Maturity Debt Securities 1) The investment is initially recorded at cost. 2) It is subsequently reported at amortized cost. 3) Unrealized holding gains and losses are not recorded. 4) Interest revenue and realized gains and losses on sales (if any) are all included in net income. Accounting for Bond Premiums Accounting for Bond Discounts Transfers of Investments Between Categories 1. A transfer from the trading category. 2. A transfer into the trading category. 3. A transfer into the available for sale category. 4. A transfer of a debt security into the held to maturity category from the available for sale category. Impairments Disclosures 1. Trading Securities—A company must disclose the change in the net unrealized holding gain or loss that is included in each income statement. 2. Available-for-Sale Securities—For each balance sheet date, a company must disclose the aggregate fair value, gross unrealized holding gains and gross unrealized holding losses and (amortized cost) by major types. 3. Held-to-Maturity Debt Securities—For each balance sheet date, a company