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IFA-II CH-3 Investment
IFA-II CH-3 Investment
INVESTMENT
ACCOUNTING FOR FINANCIAL ASSETS
Financial Asset
Cash.
ILLUSTRATION 3-1
Summary of Investment Accounting Approaches
DEBT INVESTMENTS
January 1, 2015
Cash 4,000
Debt Investments 614
Interest Revenue 4,614
Debt Investments—Amortized Cost
ILLUSTRATION 3-2
ILLUSTRATION 3-3
ILLUSTRATION 3-2
Cash 102,417
Interest Revenue (4/6 x €4,000) 2,667
Debt Investments 96,193
Gain on Sale of Debt Investments 3,557
Debt Investments—Fair Value
The journal entries in 2015 are exactly the same as those for
amortized cost.
Debt Investments—Fair Value
ILLUSTRATION 3-6
Financial Statement Presentation
of Debt Investments at Fair Value
Debt Investments—Fair Value
ILLUSTRATION 3-8
Financial Statement Presentation
of Debt Investments at Fair Value (2016)
Debt Investments—Fair Value
ILLUSTRATION 3-11
Computation of Loss on
Sale of Bonds
Cash 90,000
Loss on Sale of Debt Investments 4,214
Debt Investments 94,214
Debt Investments—Fair Value
ILLUSTRATION 3-12
Computation of Fair
Value Adjustment (2016)
Debt Investments—Fair Value
ILLUSTRATION 3-13
Reporting of Debt
Investments at Fair Value
Fair Value Option
ILLUSTRATION 3-15
Levels of Influence
Determine Accounting Methods
EQUITY INVESTMENTS
Illustration 3-16
Accounting and Reporting for Equity
Investments by Category
EQUITY INVESTMENTS
Cash 4,200
Dividend Revenue 4,200
Equity Investments—Trading (Income)
ILLUSTRATION 3-17
Computation of Fair Value Adjustment—
Equity Investment Portfolio (2015)
Equity Investments—Trading (Income)
ILLUSTRATION 3-17
Cash 287,220
Equity Investments 259,700
Gain on Sale of Equity Investment 27,520
Equity Investments—Trading (Income)
ILLUSTRATION 3-19
Computation of Fair
Value Adjustment—
Equity Investment
Portfolio (2016)
ILLUSTRATION 3-19
Cash 450
Dividend Revenue 450
Equity Investments—Non-Trading (OCI)
ILLUSTRATION 3-21
Financial Statement Presentation
Equity Investments—Non-Trading (OCI)
ILLUSTRATION 3-22
Adjustment to Carrying Value of Investment
ILLUSTRATION 3-22
Adjustment to Carrying Value of Investment
Cash 22,500
Equity Investments 20,750
Fair Value Adjustment 1,750
Holdings Between 20% and 50%
Equity Method
Record the investment at cost and subsequently adjust
the amount each period for
the investor’s proportionate share of the earnings
(losses) and
Impairment of Value
For debt investments, a company uses the impairment test to
determine whether “it is probable that the investor will be unable
to collect all amounts due according to the contractual terms.”
ILLUSTRATION 3-25
Computation of
Impairment Loss
ILLUSTRATION 3-26
Summary of Investment Accounting Approaches
End of Chapter
Three