Far 1-Marketable Securities

when an investment is made in securities that are publicly traded, and the investment is no large enough to provide the investor with any significant influence over the investee, the accounting for the investment will depend on the classification(FASB 115). 

• If carried at Marketable securities then fall into one of these categories?
• -Trading Securities
• -Available for Sale Securities
• -Held to Maturity Securities

trading securities are investments in equity instrusments, such as stocks, options, rights warrants, or debt instruments such as bonds, which the investor has acquired in an attempt to make profits by buying and selling within a short period of time. These are classified as current assets.

available securities are all investments in marketable equity or debt instruments that do not fit into trading securites or held to maturity definitions. these can be classified as current or noncurrent which depends on expected date of sale.

held to maturity securities are invesments in bonds and other debt instruments which the investor has the ability and intent to hold until the due date for repayment. These are classified as noncurrent assets only.

• trading securities are recorded initially at cost
• 1/12/x1 
• Investment x
•     Cash x

• Trading securities are kept at FV so 
• 12/31/x1 
• Investment x
•     unrealized Gain x 

with trading securities unrealized g/l go in operating income section of I/S. Realized G/L go in the non-operating section of the I/S.

• available for sale securities are initially recorded at cost:
• 1/21/x1
• investment x
•     cash x

• then available for sale securities are kept at FV so adjustment must be made
• 12/31/x1
• unrealized loss x
•     investment x

• -any unrealized g/l appear on the B/S under Comprehensive Income in the stockholder's equity section. The cumulative amount is in an account called accumulated other comprehensive income. 
• -realized g/l appear on the income statement in the nonoperating section. 
• -A4S security activity is an investing activity under cash flows statement.

• an impairment loss may occur to the securities and it must be written down if other than temporary. to check to see if needs to be written down simply test CV vs FV if less than FV then we have a impairment and record:
• Loss x
•     Impairment x

well if we reclassify the securities between trading and a4s securities we reclassify the security at FMV. The difference which is a gain/loss will be reported in the I/S.

if we have reclassifications between these two securities then we reclassify at FMV. However there are some differences so if we go from HTM to AFS then we record the g/l in OCI. if we go from A4S to HTM then we record g/l in B/S in OCI.

• held to maturity securities are initially carried at amortized cost(face net discounts/premiums)
• 1/21/x1
• Investment x
•     Cash x

• Not kept at FV so no unrealized g/l applicable. 
• -realized g/l when the bonds are sold, ect go in the I/S as part of of nonoperating income.

• -Fair value through P/L-this includes HFT category and can include AFS and HTM if elected and there is an active market. 
• -Held to Maturity- instruments with fixed and determinable and fixed maturity dates such as bonds. 
• -loans and receivables- recorded at amortized cost.
• -Available for sale-financial assets that do not fall into the other categories fall here.