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    Summary Accounting For Investments

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    John Rashid Hebaina
    This document provides an overview of accounting for investments under FASB Statement No. 115. It outlines how investments should be classified and accounted for based on factors such as the investor's level of control or influence over the investee, whether a readily determinable fair value exists, and the investor's intent and ability to hold debt securities to maturity. Based on these factors, investments are classified into four categories - held-to-maturity, trading, available-for-sale, or equity method - with each having distinct accounting treatments for changes in fair value and presentation on the financial statements.

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    Summary Accounting For Investments

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    John Rashid Hebaina
    105 views2 pages
    This document provides an overview of accounting for investments under FASB Statement No. 115. It outlines how investments should be classified and accounted for based on factors such as the investor's level of control or influence over the investee, whether a readily determinable fair value exists, and the investor's intent and ability to hold debt securities to maturity. Based on these factors, investments are classified into four categories - held-to-maturity, trading, available-for-sale, or equity method - with each having distinct accounting treatments for changes in fair value and presentation on the financial statements.

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    This document provides an overview of accounting for investments under FASB Statement No. 115. It outlines how investments should be classified and accounted for based on factors such as the investor's level of control or influence over the investee, whether a readily determinable fair value exists, and the investor's intent and ability to hold debt securities to maturity. Based on these factors, investments are classified into four categories - held-to-maturity, trading, available-for-sale, or equity method - with each having distinct accounting treatments for changes in fair value and presentation on the financial statements.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    105 views2 pages

    Summary Accounting For Investments

    Uploaded by

    John Rashid Hebaina
    This document provides an overview of accounting for investments under FASB Statement No. 115. It outlines how investments should be classified and accounted for based on factors such as the investor's level of control or influence over the investee, whether a readily determinable fair value exists, and the investor's intent and ability to hold debt securities to maturity. Based on these factors, investments are classified into four categories - held-to-maturity, trading, available-for-sale, or equity method - with each having distinct accounting treatments for changes in fair value and presentation on the financial statements.

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    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    of 2

    ACCOUNTING FOR INVESTMENTS UNDER FASB NO.

     115 – AN OVERVIEW

    Change in Fair Value


    For commercial enterprises
    Presentation on
    (nonprofit entities follow SFAS No. 124, FASB Other-than-
    Financial Statements
    1995a) Temporary Temporary
    Loss

    Does the investor have substantial influence or


    control? On BS at historical cost
    plus share of earnings
    Investor owns 20% to 50% of stock and has
    since acquisition less
    significant influence but not control of the Realized
    dividends received
    corporation loss on IS,
    (amortization may also N/A
    be required) new basis
    Use Equity Method on BS
    Investor owns over 50% of stock or otherwise
    controls the corporation
    Consolidated financial
    N/A N/A
    statements
    Consolidation required

    Does a readily determinable fair value exist? Realized


    loss on IS,
    On BS at historical cost N/A
    If not, use Cost Method new basis
    on BS
    On BS at amortized
    cost
    For debt securities, does the enterprise have the
    IS includes Realized
    positive intent and ability to hold to maturity?
    amortization of loss on IS,
    N/A
    premiums & discounts new cost
    Classify as held-to-maturity
    basis on BS
    Disclose fair value in
    notes
    Is the investment objective to generate profits on
    short-term differences in price? On BS at fair value Recognized No
    on IS and additional
    IS reports unrealized included in entries
    Classify as Trading Securities
    gain/loss for period RE needed
    All other debt and equity securities are classified
    as On BS at fair value Reported Realized
    on SCI and loss on IS,
    SCI reports holding included in new cost
    Available-for-Sale Securities
    gain/loss for period AOCI basis on BS

    AOCI = accumulated other comprehensive income (owners’ equity account); BS = balance sheet;
    FV = fair value; IS = income statement; RE = retained earnings; SCI = statement of comprehensive income;
    N/A = not applicable (since investments are not carried at fair value)

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