FASB Accounting Standards Codification Case

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I am working with our ABC client, and I wanted to let you know the issue regarding their Available-for-sale equity securities. For the second consecutive quarter, the client has been recording a decline in market value for several of their securities in “other comprehensive income”. The securities’ fair value are now below their cost. The issue with this situation is to determine if the securities are considered impaired, and if such impairment is considered “other than temporary”, in which case the company would have to account for the loss in a different way. The FASB Accounting Standards Codification (ASC) 320-10-15-5a states that topic 320-10 applies to investments in equity securities that have readily determinable fair values, therefore…show more content…
The intent and ability of the holder to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in market value. In this case, just this quarter the fair value of the securities decreased enough to be below the cost, so the extent to which the market value has been less than its costs its low. Also, the client asserts that he has the ability and intend to hold the securities, until their value recovers. Because of those two factors, and the lack of evidence that states otherwise, in this period, it’s not reasonable to state that the impairment is “other than temporary”. Therefore, I suggest that the client should continue to record the loss in “other than comprehensive income”. Also, each period the issue must be revised to determine if there is new evidence that proves that the impairment is “other than temporary”, in which case, other accounting must be done. Additionally, determine each period if the client continues to assert that the company still has the same ability and intent to hold the securities, and if the time the fair value is below the cost of the securities is large enough to consider the impairment “other than temporary”. If you have any suggestions within my evaluation, please, let me
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