tailieunhanh - Lecture Intermediate accounting: IFRS edition - Chapter 12: Investments
In this chapter, you will learn that investments that companies make in the stock and debt securities of other companies are accounted for differently depending on the nature of the investments. For instance, you'll see that investment securities categorized as securities held-to-maturity are reported at amortized cost, while securities available-for-sale and trading securities are reported at their fair values. | INVESTMENTS Chapter 12 © 2013 The McGraw-Hill Companies, Inc. Chapter 12: Investments Nature of Investments Bonds and notes (Debt securities) Common and preferred stock (Equity securities) Investments can be accounted for in a variety of ways, depending on the nature of the investment relationship. To finance its operations, and often the expansion of those operations, a corporation raises funds by selling equity securities (common and preferred stock) and debt securities (bonds and notes). These securities are purchased as investments by individual investors, mutual funds, and also by other corporations. Our focus in this chapter is on the corporations that invest in securities issued by other corporations as well as those issued by governmental units (bonds, Treasury bills, and Treasury bonds). Reporting Categories for Investments As in the separate financial statements Investments in securities that do not represent a significant ownership interest are placed in one of four categories. Debt securities may be classified as held to maturity, loans and receivables, available for sale or trading securities. Equity securities may only be classified as available for sale or trading securities. Debt securities that are classified as held to maturity are reported on the balance sheet at amortized cost. The asterisk is there to remind us that investors can elect the fair value option for HTM and AFS investments, whereby those investments are accounted for in a manner similar to trading securities. We’ll discuss that more later in the chapter. Debt or equity securities classified as available for sale are shown on the balance sheet at fair value, and any unrealized gain or loss associated with the securities is reported in Other Comprehensive Income. Debt or equity securities classified as trading securities are shown on the balance sheet at fair value, and any unrealized gains or losses are reported in current period income. Held-to-Maturity Securities On . | INVESTMENTS Chapter 12 © 2013 The McGraw-Hill Companies, Inc. Chapter 12: Investments Nature of Investments Bonds and notes (Debt securities) Common and preferred stock (Equity securities) Investments can be accounted for in a variety of ways, depending on the nature of the investment relationship. To finance its operations, and often the expansion of those operations, a corporation raises funds by selling equity securities (common and preferred stock) and debt securities (bonds and notes). These securities are purchased as investments by individual investors, mutual funds, and also by other corporations. Our focus in this chapter is on the corporations that invest in securities issued by other corporations as well as those issued by governmental units (bonds, Treasury bills, and Treasury bonds). Reporting Categories for Investments As in the separate financial statements Investments in securities that do not represent a significant ownership interest are placed in one of
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