Marketing Standards Of T. Incorporated Corporation That Creates And Sells Collegiate Apparel

1060 Words5 Pages
O.T.T. Incorporated is a clothing manufacturer that creates and sells collegiate apparel. In year 20X1, O.T.T. Incorporated hired a group of college graduates to create an investment department for the company. After a year, six investments remain in the department’s portfolio. All investments are impaired as they have all decreased in value relative to each investment’s original price. According to The Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC), “an investment is impaired if the fair value of the investment is less than its cost” (ASC 320-10-35-21). Auditors have asked the company to determine if any of the company’s investments are other-than-temporarily impaired as of December 31, 20X1 to ensure…show more content…
The Happy New Year & Co. investment should not record an other-than-temporary impairment because the company does not intend to sell the investment and management still believes that the company can fully recover the amortized cost basis as they do not think the decline in the price is permanent. The Beary Beary investment should recognize an other-than-temporary impairment. O.T.T. Incorporated established intent to sell by creating a policy that required the sale of the security when the fair value became less than the amortized cost. As of December 31, 20X1 the amortized cost of the debt security ($95) and the fair value ($88). And the company does not expect to recover the entire amortized cost basis of the security. O.T.T. Incorporated should record an impairment loss of $7 ($95 - $88). The Buy-A-Lot Company should not record an other-than-temporary impairment because the company does not intend to sell the investment in the future and S&P upgraded the credit rating from BBB to BBB+. An upgraded credit rating enhances the quality of the investment (ASC 320-10-35-33F). Assuming that March Madness Incorporated stock is other-than-temporarily impaired because of the decrease in the share price of $100 on March 25, 20X1 to $72
Open Document