chapter14Investments 西方 财务会计 电子课件.ppt

Chapter 14 Investments Overview: Why Invest In Financial Instrument Temporary Investment of Idle Cash Long-Term Investments to increase Earnings Valuation and investment income measurement Investment in different securities Securities are either debt securities or equity securities. A debt security is any security representing a creditor relationship with an entity. A equity security is any security representing an ownership interest in an entity. Cost And Amortized Cost Method Cost method Investment in equity securities Fair value of those securities are not determinable Do not require equity method The investment is carried at its cost on the balance sheet Dividends are recorded as investment income See Example 1 in p.g. 248-249 Amortized Cost method Investment in debt securities Hold the securities to the maturity date See Example 2 in p.g. 250 Trading Securities- fair value method Trading securities are used to generate profits from short term differences in prices. The securities are reported at fair value Unrealized gains and losses are reported as part of net income See Example 3 on page 251 Available-for-Sale Debt Securities These investments are reported at fair value in the balance sheet. Differences between the fair value and amortized cost are reported as OE : Accumulated unrealized holding gains and losses (part of equity) When realized, gains and losses in fair value are reported as part of net income See Example 4 on page 253 Equity Method A substantive economic relationship is acknowledged between the investor and the investee The investment’s carrying value is increased by investor’s proportionate share of earnings The investment’s carrying value is decreased by: investor’s proportionate share of losses dividends received by investee See Example on page 255. Investments in Equity Securities: Goodwill To be explained in Chapter 16 * * Investments in Equity Securities: Summary Ownership in Capital Stock less than 2