PART A: Investors Lacks significant influence
1. Purchasing the investment
2. Recognizing investment revenue
3. Holding the investment during periods in which the investments fair value changes
4. Selling the investment
Securities to be held to Maturity
The market value of a fixed-rate investment moves in the opposite direction of market rates of interest. Changes in market value are less relevant to an investor who will hold a security to its maturity regardless of those changes. All investment securities are initially recorded at cost. The effective interest on debt is the market rate of interest multiplied by the outstanding balance of the debt.
Note: If a bond is purchased at a discount, less cash is received each period than the effective interest, so the unpaid difference increases the outstanding balance of the investment.
Actively managed in a trading account for the purpose of profiting from short-term price changes. Unrealized holding gains and losses for trading securities are included in net income in the period in which fair value changes. TS are adjusted to their fair value at each reporting date.
Reported at Fair Values. When a company acquires an investment, not for an active trading account or to be held to maturity.
Includes not only net incomes, but also other changes in equity that dont arise from transactions with owners.
Financial Statement Presentation: I/S and Comprehensive Income Statement
Realized gains and losses are shown in net income in the period in which securities are sold. Unrealized gains and losses are shown in OCI in the periods in which changes in FV occur, and reclassified out of OCI in the periods in which securities are sold.
Investments in AFS securities are reported at fair value. Unrealized gains and losses affect AOCI in Shareholders equity, and are reclassified out of AOCI in the periods in which securities are sold.
Cash Flow Statement
Cash Flows from buying and selling AFS securities typically are classified as investing activities.
Transfer between reporting categories
Accounted for at fair value and in accordance with the new reporting classification.
Impairment of Investments
An "other-than-temporary" impairment loss is recognized in net income even though the security hasn't been sold.
Financial Statement Presentation and Disclosure
Extensive footnote disclosure is provided to help financial statement users assess the quality of fair value measurements and understand where they affect the financial statements.