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Accounting Study Guide |
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| U.S. GAAP | IFRS, IAS | Accounting Topics |
Investments in Debt and Equity
Securities
(SFAS No. 115)
U.S. GAAP Codification,
IFRS,
Accounting Terms,
Accounting
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Principles of Accounting,
Intermediate Accounting,
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ASC,
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| Investments in Debt and Equity Securities |
| Statement of Financial Accounting Standards (SFAS) No. 115 a. Accounting for Certain Investments in Debt and Equity Securities b. Issued in May 1993 c. Supersedes SFAS No. 12, "Accounting for Certain Marketable Securities." Investments in Equity
Securitiesa. More than 50% ownership of another company --> Consolidated Financial Statements --> Accounting Research Bulletin (ARB) No. 51, August 1959 b. At least 20%, but no more than 50% ownership of another company --> Equity Method is used. --> Accounting Principles Board (APB) Opinion No. 18, March 1971 c. Less than 20% ownership of another company --> No significant influence --> Rules of SFAS No. 115 (May 1993) are applied. Investments in Debt
Securitiesa. Rules of SFAS No. 115 (May 1993) are applied. Investments in Equity
Securitiesa. Trading securities --> Purpose of selling in the near term b. Available-for-sale securities --> Investments in equity securities --> not classified as "Trading Securities"
Investments in Debt Securitiesa. Trading securities --> Purpose of selling in the near term b. Available-for-sale securities --> Investments in debt securities --> not classified as "Trading Securities" --> nor as "Held-to-maturity Securities" c. Held-to-maturity securities --> Intent and ability to hold to maturity --> Reported at amortized cost Unrealized holding gains and
lossesa. Trading securities --> Included in earnings b. Available-for-sale securities --> Not included in earnings --> Reported in a separate component of shareholders' equity --> Reported as a net amount c. Held-to-maturity securities --> Unrealized holding gains and losses are not recognized. Transfers
between Categoriesa. Transfer FROM trading securities --> Unrealized holding gain or loss (at the date of transfer) is recognized in earnings b. Transfer INTO trading securities --> Unrealized holding gain or loss (at the date of transfer) is recognized in earnings c. FROM held-to-maturity INTO available-for-sale --> Unrealized holding gain or loss (at the date of transfer) is recognized in the shareholders' equity section d. FROM available-for-sale INTO held-to-maturity --> Unrealized holding gain or loss (at the date of transfer) continues to be reported in the shareholders' equity section --> amortized over the remaining life |
| Examples of Unrealized Holding Gains and Losses | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Unrealized
Holding Gains and Losses [Example 1] Company A invested in the following securities during 2011.
Journal Entry
(12/31/2011)
(*1)
reported on the income statement, included in earnings
Journal Entry
(12/31/2011)
(*2)
reported on the balance sheet, in the shareholders' equity section
Journal Entry
(12/31/2012)
Example
1 of unrealized holding gains and losses in pdf |