中级财务会计第七章-.ppt
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1、12-1Chapter 07Investments1 112-2Nature of InvestmentsBonds and notes(Debt securities)Common and preferred stock(Equity securities)Investments can be accounted for in a variety of ways,depending on the nature of the investment relationship.12-3Reporting Categories for Investments12-4Investor Lacks Si
2、gnificant Influence12-5Securities to Be Held to MaturityInvestments in bonds or other debt security that have a specified maturity date.The bonds or other debt are initially recorded at cost.The investor may have the“positive intent and ability”to hold the securities to maturity and classified as he
3、ld-to-maturity(HTM).They are reported on the balance sheet at“amortized cost.”Amortized cost(Face amount less unamortized discount,or plus unamortized premium).BalanceSheet12-6Securities to Be Held to MaturityOn January 1,2011,Matrix,Inc.purchased as an investment$1,000,000,of 10%,10-year bonds,inte
4、rest paid semi-annually.The market rate for similar bonds is 12%.Lets look at calculation of the present value of the bond issue.PresentAmountPVFactorValueInterest$50,000 11.46992=$573,496Principal1,000,000 0.31180=311,805Presentvalueofbonds$885,301PV of ordinary annuity of$1,n=20,i=6%PV of$1,n=20,i
5、=6%12-7Securities to Be Held to MaturityPartial Bond Amortization TableJanuary 1,2011Investment in bonds1,000,000Discount on bond investment 114,699Cash 885,301June 30,2011Cash(stated rate face amount)50,000Discount on bond investment 3,118Investment revenue 53,11812-8Securities to Be Held to Maturi
6、ty$114,699-$3,118=$111,581 unamortized discountThis investment would appear on the June 30,2011,as follows:Unrealized holding gains and losses are not recognized for HTM investments.12-9Securities to Be Held to MaturityOn December 31,2011,after interest is received by Matrix,all the bonds are sold f
7、or$900,000 cash.December 31,2011Cash50,000Discount on bond investment 3,305Investment revenue 53,305December 31,2011Cash 900,000Discount on bond investment108,276Investment in bonds 1,000,000Gain on sale of investment 8,27612-10Trading SecuritiesInvestments in debt or equity securities acquired prin
8、cipally for the purpose of selling them in the near term.Adjustments to fair value are recorded:1.in a valuation account called Fair Value Adjustment,or as a direct adjustment to the investment account.2.as a net unrealized holding gain/loss on the Income Statement.Unrealized Gain Unrealized Loss In
9、come Statement12-11Trading Securities Matrix,Inc.purchased securities classified as Trading Matrix,Inc.purchased securities classified as Trading Securities(TS)on December 22,2011.The fair value Securities(TS)on December 22,2011.The fair value amounts for these securities on December 31,2011,are amo
10、unts for these securities on December 31,2011,are shown below.Prepare the journal entries for Matrix,Inc.to shown below.Prepare the journal entries for Matrix,Inc.to showing the purchase of the securities,and adjust the showing the purchase of the securities,and adjust the securities to fair value a
11、t 12/31/11.securities to fair value at 12/31/11.12-12Trading SecuritiesDecember 22,2011Investment in Mining,Inc.stock 42,000Investment in Toys and Things stock 22,500Cash 64,500December 31,2011Net unrealized holding gains and losses I/S 3,500Fair value adjustment 3,500Reported on the balance sheet a
12、sa adjunct account to the investment.The Net Unrealized Holding Loss is reported on the Income Statement.12-13Trading SecuritiesOn January 3,2012,Matrix sold all trading securities for$65,000 cash.Lets record the entry for the sale and the adjustment to the fair value adjustment account.January 3,20
13、12Cash65,000Investment in Mining,Inc.stock T/S42,000Investment in Toys and Things stock T/S22,500Gain on sale of investment 500December 31,2012Fair value adjustment 3,500Net unrealized holding gains or losses I/S 3,50012-14Financial Statement PresentationTrading securities are presented on the finan
14、cial statement as follows:1.Income Statement and Comprehensive Income Statement:Fair value changes are included on the income statement in the periods in which they occur,regardless of whether they are realized or unrealized.Investments in trading securities do not affect other comprehensive income.
15、2.Balance Sheet:Securities are reported at fair value,typically as current assets,and do not affect accumulated other comprehensive income in shareholders equity.3.Cash Flow Statement:Cash flows from buying and selling trading securities typically are classified as operating activities,because the i
16、nvestor that hold trading securities consider them as part of their normal operations.12-15Financial Statement PresentationPresented below are the partial financial statements showing the accounting for TS owned by United:12-16Securities Available-for-SaleInvestments in debt or equity securities tha
17、t are not for active trading and not to be held to maturity are classified as available-for-sale(AFS).Adjustments to fair value are recorded:1.in a valuation account called fair value adjustment,or as a direct adjustment to the investment account.2.as a net unrealized holding gain/loss in other comp
18、rehensive income(OCI),which accumulates in accumulated other comprehensive income(ACOI).Unrealized Gain Unrealized Loss Other Comprehensive Income(OCI)12-17Other Comprehensive Income(OCI)When we add other comprehensive income to net income we refer to the result as“comprehensive income.”12-18Accumul
19、ated Other Comprehensive IncomeUnrealized holding gains and losses on available-for-sale securities are accumulated in the shareholders equity section of the balance sheet.Specifically,the account is included in accumulated other comprehensive income(AOCI).Shareholders EquityCommon StockPaid-in Capi
20、tal in Excess of parAccumulated other comprehensive incomeRetained earningsTotal Shareholders EquityNet unrealizedholding gains and losses.12-19Securities Available for Sale ExampleAssume the same information for our T/S example for Matrix,Inc.,except that the investments are classified as available
21、-for-sale securities rather than trading securities.December 31,2011Net unrealized holding gains and losses OCIOCI 3,500Fair value adjustment 3,50012-20Financial Statement PresentationAFS securities are presented on the financial statement as follows:1.Income Statement and Comprehensive Income State
22、ment: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 fair value occur,and reclassified out of OCI in the periods in which securities are sold.2.Balance Sheet:Investments in AF
23、S 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.3.Cash Flow Statement:Cash flows from buying and selling AFS securities typically are classified as investing activities
24、.12-21Financial Statement PresentationPresented below are the partial income statement showing the accounting for AFS of United:12-22Financial Statement PresentationFinally,we have the partial balance sheet and statement of cash flows for the company.12-23U.S.GAAP vs.IFRSU.S.GAAP also allows transfe
25、rs out of the trading security category.Reclassifications under U.S.GAAP are rare.Until recently,IFRS did not allow transfers out of their“fair value through profit and loss”classification.IAS No.39 now allows transfer of debt investments out of the fair value category into AFS or HTM in“rare circum
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- 中级 财务会计 第七
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