Term
| How should an investor initially record an investment? |
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Definition
| An investment initially should be recorded at cost in accordance with the cost principle, as in the acquisition of any asset. Later, the appropriate accounting for an investment depends upon the nature of the investment. |
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Term
| A debt security for which an investor has the "positive intent and ability" to hold the security to maturity is classified as held to maturity. How should these be reported? |
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Definition
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Term
| What constitutes a trading security? |
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Definition
| A trading security is a debt or equity held in active trading account for immediate resale. |
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Term
| How is a trading security reported? |
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Definition
| Fair value with unrealized gains and losses included in earnings. |
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Term
| How is an available-for-sale security reported? |
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Definition
| Fair value with unrealized gains and losses excluded from earnings and reported in shareholders' equity. |
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Term
| If the fair value of a security is not determinable and the equity method is not appropriate, how should it be reported? |
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Definition
| It should be reported at original cost. |
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Term
| Are investment securities reported as current or noncurrent assets? |
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Definition
| The can be either current or noncurrent depending on when they are expected to be sold or mature. |
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Term
| How do we account for a transfer of a security between reporting categories? |
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Definition
| A transfer of a security between reporting categories is accounted for at fair value and in accordance with the new reporting classification. |
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Term
| How are inflows and outflows of cash from buying and selling securities available-for-sale reported in the statement of cash flows? |
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Definition
| Because available-for-sale securities are not purchased primarily to be sold in the near term, cash flows from thier purchase, sale, and maturity are reported as investing activites. |
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