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Investments

Investments. Sid Glandon, DBA, CPA Associate Professor of Accounting The University of Texas at El Paso. Debt Securities. Classified as trading Held for sale in near term to generate income Classified as available-for-sale Not classified as held-to-maturity or trading securities

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Investments

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  1. Investments Sid Glandon, DBA, CPA Associate Professor of Accounting The University of Texas at El Paso

  2. Debt Securities • Classified as trading • Held for sale in near term to generate income • Classified as available-for-sale • Not classified as held-to-maturity or trading securities • Classified as held-to-maturity • Positive intent and ability to hold to maturity

  3. Fact Pattern:Investment in Debt Securities

  4. Debt Securities, Classified as Trading • Valuation • Fair value • Unrealized holding gains or losses • Recognized in net income • Other income • Interest earned • Realized gains and losses from sale

  5. Debt Security, Classified as trading

  6. Debt Security, Classified as trading

  7. Debt Security, Classified as trading

  8. Debt Security, Classified as trading

  9. Debt Security, Classified as trading

  10. Debt Security, Classified as available-for-sale • Valuation • Fair value • Unrealized holding gains or losses • Recognized as other comprehensive income • Recognized as separate component of stockholders’ equity • Other income • Interest earned • Realized gains and losses from sale

  11. Debt Security, Classified as available-for-sale

  12. Debt Security, Classified as available-for-sale

  13. Debt Security, Classified as available-for-sale

  14. Debt Security, Classified as available-for-sale

  15. Debt Security, Classified as available-for-sale

  16. Debt Security, Classified as available-for-sale

  17. Debt Securities, Classified as Held-to-Maturity • Valuation • Amortized cost • Unrealized holding gains or losses • Not recognized • Other income • Interest earned • Realized gains and losses from sale

  18. Equity Securities • Ownership interests • Include rights to buy or sell ownership • Extent of ownership determines accounting treatment for equity securities

  19. Degrees of Control

  20. Fact Pattern:Investment in Equity Securities

  21. Equity Security,Classified as available-for-sale • Less than 20% ownership interest • Recorded at cost • Valued and reported at fair value • Dividends are recognized as income • Unrealized holding gains and losses • Part of comprehensive income • A component of stockholders’ equity

  22. Equity Security,Classified as available-for-sale

  23. Equity Security,Classified as available-for-sale

  24. Equity Security,Classified as available-for-sale

  25. Equity Security,Classified as available-for-sale

  26. Equity Security,Classified as available-for-sale

  27. Equity Security,Classified as available-for-sale

  28. Trading • Less than 20% ownership interest • Recorded at cost • Valued and reported at fair value • Dividends are recognized as income • Unrealized holding gains and losses • Recognized in net income

  29. Equity Security, Classified as trading

  30. Equity Security, Classified as trading

  31. Equity Method • Between 20% and 50% ownership interest • Substantive economic relationship • Investor’s carrying value • Increased by proportionate share of earnings • Decreased by • Dividends, and • Proportionate share of losses

  32. Consolidation • More than 50% voting interest • Investor is parent • Investee is subsidiary • Investor prepares consolidated financial statements • Investor accounts for investment on its books using the equity method

  33. Investments In Equity Securities

  34. Accounting by Category

  35. Transfers of Classifications

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