Equity investments: The financial instruments which claim ownership in the issuing company and pay a dividend revenue to the investor company, are referred to as equity securities. The investments in equity securities are referred to as equity investments.
Debt investments: The financial instruments which are bought by investors, or corporations, or mutual funds, are referred to as debt securities. The investments in debt securities are referred to as debt investments.
International Financial Reporting Standards (IFRS): IFRS are a set of international accounting standards which are framed, approved, and published by International Accounting Standards Board (IASB) for the preparation and disclosure of international financial reports.
To mention: The categories for debt investments, and equity investments, in which the investor lacks significant influence, according to IFRS Number: 9
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Chapter 12 Solutions
INTERMEDIATE ACCOUNTING <CUSTOM LL>
- what reporting categories are used to account for debt investments?arrow_forwardWhy are claims on income discretionary with equityfinancing but nondiscretionary with debt financing?arrow_forwardWhich of the following is true regarding accounting for debt investments? A) The classification of the debt investments would affect how we record the purchase of the investments. B) The classification of the debt investments would affect how we record the interest revenue from the investments. C) The classification of the debt investments would affect how we record the sale of the investments. D) All of the above. Which of the following is NOT true when fair value option is elected for held - to - maturity debt investments? A) The fair value option must be elected at the time of purchase. B) The fair value option must be elected for all such investments. C ) Unrealized holding gains and losses on that investment will be recognized in net income. D) The investment is reported at fair value on the balance sheet.arrow_forward
- Why should an investor use debt?arrow_forwardWhich statement is not true? Equity investment and trading debt investment have the same accounting about how to report their unrealized gain/loss and how to report them on the balance sheet. Only debt securities, not equity securities, can be classified as held-to-maturity, available-for-sale or trading. Change in fair value of available-for-sale and held-to-maturity debt investments have no impact on net income. Cash flows relating to held-to-maturity investments and trading investments involve both investing and operating activities.arrow_forwardWhen do companies recognize gains and losses from the extinguishment of debt? Where are the gains and losses disclosed on the income statement?arrow_forward
- Which of the following transaction costs will not be included in the pro-forma adjustment to net earnings? Debt refinancing premium Other transaction costs Equity financing fees Amortization of debt financing feesarrow_forwardThe use of fair value to account for debt investments allows for more relevance of accounting figures because they would reflect the latest market assessment and opinion regarding these instruments. b. What are the possible disadvantages’ of using the fair value accounting?arrow_forwardThe use of fair value to account for debt investments allows for more relevance of accounting figures because they would reflect the latest market assessment and opinion regarding these instruments. a. Do you agree with this statement? Explain why.arrow_forward
- Debt covenants are least likely to place restrictions on the issuer’s ability to:A . pay dividends.B . issue additional debt.C . issue additional equity.arrow_forwardHow would a debit balance in Unrealized Gain (Loss) on Available-for-Sale Investments be reported in the financial statements? Is it better to have an unrealized or realized gain and what are the effects on your bottom line? Also, how are the balance sheet and income statement affected by fair value accounting?arrow_forwardThe use of fair value to account for debt investments allows for more relevance of accounting figures because they would reflect the latest market assessment and opinion regarding these instruments. a. Do you agree with this statement? Explain why. b. What are the possible disadvantages’ of using the fair value accounting?arrow_forward
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