中级财务会计英文ch09.ppt

Investments Chapter 9 Learning Objectives Identify the three categories of debt securities and describe the accounting and reporting treatment for each category. Understand the procedures for discount and premium amortization on bond investments. Identify the categories of equity securities and describe the accounting and reporting treatment for each category. Explain the equity method of accounting and compare it to the fair value method for equity securities. Describe the disclosure requirements for investments in debt and equity securities. Discuss the accounting for impairments of debt and equity investments. Describe the accounting for transfer of investment securities between categories. Use of idle cash Low risk investments Quickly and easily converted to cash Securities of federal, state, and local government agencies Develop beneficial intercompany relationships. May indirectly improve profitability of investing company. May represent ownership interest. Classification -- Management’s intended holding period for the security Valuation and investment income measurement -- Cost vs. fair value -- Treatment of holding gains losses Disclosure Debt or equity security? Fair value readily determinable? Management’s intended holding period? Influence or control over investee? -- Only for equity securities with voting rights Represent creditor relationship with an entity. -- US Treasury securities, municipal securities, corporate bonds, convertible debt, commercial paper, and redeemable preferred stock Represent ownership interest in an entity or the right to acquire or to dispose of an ownership right at a fixed price. -- Common stock, preferred stock, warrants, rights, and options Amount at which a financial instrument could be exchanged in a current transaction between a willing buyer and willing seller Recorded at cost when acquired. Purchase price and incidental costs Basket purchase requires allocation of the total cost to each class of secu