LooseLeaf Intermediate Accounting w/ Annual Report; Connect Access Card
8th Edition
ISBN: 9781259542848
Author: J. David Spiceland
Publisher: McGraw-Hill Education
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Question
Chapter 12, Problem 12.5Q
To determine
Available-for-sale (AFS) securities: These are short-term or long-term investments in debt and equity securities with an intention of holding the investment for some strategic purposes like meeting liquidity needs, or manage interest risk.
To describe: The accounting treatment of unrealized holding gains and losses for available-for-sale investments
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Reporting an investment at its fair value means adjusting its carrying amount for changes in fair value afterits acquisition (or since the last reporting date if it was held at that time). Such changes are called unrealizedholding gains and losses because they haven’t yet been realized through the sale of the security. If the security isclassified as available-for-sale, how are unrealized holding gains and losses typically reported?
Reporting an investment at its fair value requires adjusting its carrying amount for changes in fair value after its acquisition (or since the last reporting date if it was held at that time). Such changes are called unrealized holding gains and losses because they haven’t yet been realized through the sale of the security. If a security is classified as available-for-sale, and an unrealized holding loss is viewed as giving rise to an other-than-temporary (OTT) impairment, how is it reported in the financial statements?
(Based on Appendix 12B) Reporting an investment at its fair value requires adjusting its carrying amount forchanges in fair value after its acquisition (or since the last reporting date if it was held at that time). Such changesare called unrealized holding gains and losses because they haven’t yet been realized through the sale of thesecurity. If a security is classified as available-for-sale, and an unrealized holding loss is viewed as giving rise toan other-than-temporary (OTT) impairment, how is it reported in the financial statements?
Chapter 12 Solutions
LooseLeaf Intermediate Accounting w/ Annual Report; Connect Access Card
Ch. 12 - Prob. 12.1QCh. 12 - When market rates of interest rise after a...Ch. 12 - Does GAAP distinguish between fair values that are...Ch. 12 - When a debt investment is acquired to be held for...Ch. 12 - Prob. 12.5QCh. 12 - What is comprehensive income? Its composition...Ch. 12 - Why are holding gains and losses treated...Ch. 12 - Prob. 12.8QCh. 12 - Prob. 12.9QCh. 12 - Prob. 12.10Q
Ch. 12 - Prob. 12.11QCh. 12 - Prob. 12.12QCh. 12 - Do U.S. GAAP and IFRS differ in the amount of...Ch. 12 - Under what circumstances is the equity method used...Ch. 12 - The equity method has been referred to as a...Ch. 12 - In the application of the equity method, how...Ch. 12 - Prob. 12.17QCh. 12 - Prob. 12.18QCh. 12 - Prob. 12.19QCh. 12 - How does IFRS differ from U.S. GAAP with respect...Ch. 12 - What is the effect of a company electing the fair...Ch. 12 - Define a financial instrument. Provide three...Ch. 12 - Some financial instruments are called derivatives....Ch. 12 - Prob. 12.24QCh. 12 - Prob. 12.25QCh. 12 - Prob. 12.26QCh. 12 - (Based on Appendix 12B) Reporting an investment at...Ch. 12 - Prob. 12.28QCh. 12 - Explain how the CECL model (introduced in ASU No....Ch. 12 - Prob. 12.1BECh. 12 - Prob. 12.2BECh. 12 - Available -for-sale securities LO12-4 SL...Ch. 12 - Prob. 12.4BECh. 12 - Prob. 12.5BECh. 12 - Prob. 12.6BECh. 12 - Prob. 12.7BECh. 12 - Prob. 12.8BECh. 12 - Prob. 12.9BECh. 12 - Prob. 12.10BECh. 12 - Prob. 12.11BECh. 12 - Prob. 12.12BECh. 12 - Prob. 12.13BECh. 12 - Prob. 12.14BECh. 12 - Prob. 12.15BECh. 12 - Prob. 12.16BECh. 12 - Prob. 12.17BECh. 12 - Prob. 12.18BECh. 12 - Prob. 12.1ECh. 12 - Prob. 12.2ECh. 12 - Prob. 12.3ECh. 12 - Prob. 12.4ECh. 12 - Prob. 12.5ECh. 12 - Prob. 12.6ECh. 12 - Prob. 12.7ECh. 12 - Prob. 12.8ECh. 12 - Prob. 12.9ECh. 12 - Prob. 12.10ECh. 12 - Prob. 12.11ECh. 12 - Prob. 12.12ECh. 12 - Prob. 12.13ECh. 12 - Prob. 12.14ECh. 12 - Prob. 12.15ECh. 12 - Prob. 12.16ECh. 12 - Prob. 12.17ECh. 12 - Prob. 12.18ECh. 12 - Prob. 12.19ECh. 12 - Prob. 12.20ECh. 12 - Prob. 12.21ECh. 12 - Prob. 12.22ECh. 12 - Prob. 12.23ECh. 12 - Prob. 12.24ECh. 12 - Prob. 12.25ECh. 12 - Prob. 12.26ECh. 12 - Prob. 12.27ECh. 12 - Prob. 12.28ECh. 12 - Prob. 12.29ECh. 12 - Prob. 12.30ECh. 12 - Prob. 12.31ECh. 12 - Prob. 1CPACh. 12 - Prob. 2CPACh. 12 - Prob. 3CPACh. 12 - Prob. 4CPACh. 12 - Prob. 5CPACh. 12 - Prob. 6CPACh. 12 - Prob. 7CPACh. 12 - Prob. 8CPACh. 12 - Prob. 9CPACh. 12 - Prob. 10CPACh. 12 - Prob. 11CPACh. 12 - Prob. 12CPACh. 12 - Prob. 13CPACh. 12 - Prob. 1CMACh. 12 - Prob. 2CMACh. 12 - Prob. 3CMACh. 12 - Prob. 12.1PCh. 12 - Prob. 12.2PCh. 12 - Prob. 12.3PCh. 12 - Prob. 12.4PCh. 12 - Prob. 12.5PCh. 12 - Prob. 12.6PCh. 12 - Prob. 12.7PCh. 12 - Prob. 12.8PCh. 12 - Prob. 12.9PCh. 12 - Prob. 12.10PCh. 12 - Prob. 12.11PCh. 12 - Prob. 12.12PCh. 12 - Prob. 12.13PCh. 12 - P 12–14
Classifying investments
LO12–1 through...Ch. 12 - Prob. 12.15PCh. 12 - Prob. 12.16PCh. 12 - Prob. 12.17PCh. 12 - Prob. 12.18PCh. 12 - Prob. 12.1BYPCh. 12 - Prob. 12.2BYPCh. 12 - Case 12–4
Accounting for debt and equity...Ch. 12 - Prob. 12.6BYPCh. 12 - Prob. 12.7BYP
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Similar questions
- When using the fair value method, we adjust the reported amount of the investment for changes in fair value after its acquisition. If the security is classified as available-for-sale, how do we report unrealized holding gains and losses?arrow_forwardGenerally, the value in use of the acquiree's net assets is more than the original equity market value because of the value of control. True or False?arrow_forwardWhich statement is correct regarding derecognition of financial assets? A. Transfer of risks and rewards is evaluated by determining the transferee’s ability to sell the asset. B. A sale and repurchase transaction where the repurchase price is a fixed price is a transfer of financial asset that qualifies for derecognition. C. The entity shall continue to recognize the transferred asset in its entirety if the transfer does not qualify for derecognition because the entity has retained substantially all the risks and rewards of ownership of the transferred asset. D. If an entity neither transfers nor retains substantially all the risks and rewards of ownership of a transferred asset, the entity shall continue to recognize the transferred asset to the extent of its continuing involvement.arrow_forward
- When a firm disposes of a capital asset, the difference between the net book value of the asset and the sale proceeds is: Select one: a. A special gain or loss b. An ordinary gain or loss c. A gain or loss from a discontinued operation d. A gain or loss from a prior period e. None of the aboe try to maintain plagiarismarrow_forwardExamples of when an entity has retained substantially all the risks and rewards of ownership of transferred financial asset include A. All of these. B.A sale and repurchase transaction where the repurchase price is a fixed price or the sale price plus a lender's return. C.A sale of a financial asset together with a total return swap that transfers the market risk exposure back to the entity. D.A sale of short-term receivables in which the entity guarantees to compensate the transferee for credit losses that are likely to occur.arrow_forwardreceivables not measured initially at their transaction price are measured initially ata. fair value plus transaction costs that are directly attributable to the acquisition of the financial assetb. fair valuec. fair value minus transaction costs that are directly attributable to the acquisition of the financial assetd. fair value less costs to sellarrow_forward
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- Which of the following is correct about subsequent measurement of financial asset at fair value? a. the financial asset shall be measured at fair value if the business model is not to collect contractual cash flows on specified dates and the contractual cash flow ae not solely payment of principal and interest. b. An entity may designate a finacncial asset as measured at fair value through profit or loss even if the financial asset satisfies the amortized cost measurement. c. both are correct d. both are incorrectarrow_forwardhow is the acquisition cost of an asset determined when the asset is acquired in exchange for securities?arrow_forward
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