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1、chapter14Investments西方财务会计电子,1,Chapter 14,Investments,chapter14Investments西方财务会计电子,2,Overview: Why Invest In Financial Instrument,Temporary Investment of Idle Cash Long-Term Investments to increase Earnings Valuation and investment income measurement,chapter14Investments西方财务会计电子,3,Investment in diff
2、erent securities,Securities are either debt securities or equity securities. A debt security is any security representing a creditor relationship with an entity. A equity security is any security representing an ownership interest in an entity.,chapter14Investments西方财务会计电子,4,Cost And Amortized Cost
3、Method,Cost method Investment in equity securities Fair value of those securities are not determinable Do not require equity method The investment is carried at its cost on the balance sheet Dividends are recorded as investment income See Example 1 in p.g. 248-249,chapter14Investments西方财务会计电子,5,Amor
4、tized Cost method Investment in debt securities Hold the securities to the maturity date See Example 2 in p.g. 250,chapter14Investments西方财务会计电子,6,Trading Securities- fair value method,Trading securities are used to generate profits from short term differences in prices. The securities are reported a
5、t fair value Unrealized gains and losses are reported as part of net income See Example 3 on page 251,chapter14Investments西方财务会计电子,7,Available-for-Sale Debt Securities,These investments are reported at fair value in the balance sheet. Differences between the fair value and amortized cost are reporte
6、d as OE : Accumulated unrealized holding gains and losses (part of equity) When realized, gains and losses in fair value are reported as part of net income See Example 4 on page 253,chapter14Investments西方财务会计电子,8,Equity Method,A substantive economic relationship is acknowledged between the investor
7、and the investee The investments carrying value is increased by investors proportionate share of earnings The investments carrying value is decreased by: investors proportionate share of losses dividends received by investee See Example on page 255.,chapter14Investments西方财务会计电子,9,Investments in Equi
8、ty Securities: Goodwill,To be explained in Chapter 16,chapter14Investments西方财务会计电子,10,Investments in Equity Securities: Summary,chapter14Investments西方财务会计电子,11,Debt Securities: Types and Reported Amounts,Debt Instruments representing a CREDITOR relationship,chapter14Investments西方财务会计电子,12,Equity Sec
9、urities: Accounting by Category,CategoryValuationUnrealized HoldingInvest. Income Method Gains and Losses Effects (I/S),20% Cost None Dividends Permanent impairment,20%Fair value Net income(I/S) Dividends; Trading G & L (sale),20% -Equity - Proportionate 50% investees income,50%Consolidate - Proportionate Subsidiarys income (Parent company separate F/S),20%Fair value Equity (B/S) Dividends and Avail for sale G & L (sale),chapter14Investments西方财务会计电子,13,