Chapter 17 – Investments. After completing this chapter, students will be able to: Identify the three categories of debt securities and describe the accounting and reporting treatment for each category, understand the procedures for discount and premium amortization on bond investments, identify the categories of equity securities and describe the accounting and reporting treatment for each category. | PREVIEW OF CHAPTER Intermediate Accounting IFRS 2nd Edition Kieso, Weygandt, and Warfield 17 Understand the accounting for equity investments at fair value. Explain the equity method of accounting and compare it to the fair value method for equity investments. Discuss the accounting for impairments of debt investments. Describe the accounting for transfer of investments between categories. After studying this chapter, you should be able to: Investments 17 LEARNING OBJECTIVES Describe the accounting framework for financial assets. Understand the accounting for debt investments at amortized cost. Understand the accounting for debt investments at fair value. Describe the accounting for the fair value option. ACCOUNTING FOR FINANCIAL ASSETS Financial Asset Cash. Equity investment of another company (., ordinary or preference shares). Contractual right to receive cash from another party (., loans, receivables, and bonds). IASB requires that companies classify financial assets into two measurement categories—amortized cost and fair value—depending on the circumstances. LO 1 Measurement Basis—A Closer Look IFRS requires that companies measure their financial assets based on two criteria: Company’s business model for managing its financial assets; and Contractual cash flow characteristics of the financial asset. Only debt investments such as receivables, loans, and bond investments that meet the two criteria above are recorded at amortized cost. All other debt investments are recorded and reported at fair value. ACCOUNTING FOR FINANCIAL ASSETS LO 1 Measurement Basis—A Closer Look Equity investments are generally recorded and reported at fair value. ACCOUNTING FOR FINANCIAL ASSETS LO 1 ILLUSTRATION 17-1 Summary of Investment Accounting Approaches Understand the accounting for equity investments at fair value. Explain the equity method of accounting and compare it to the fair value method for equity investments. Discuss the accounting for impairments of debt . | PREVIEW OF CHAPTER Intermediate Accounting IFRS 2nd Edition Kieso, Weygandt, and Warfield 17 Understand the accounting for equity investments at fair value. Explain the equity method of accounting and compare it to the fair value method for equity investments. Discuss the accounting for impairments of debt investments. Describe the accounting for transfer of investments between categories. After studying this chapter, you should be able to: Investments 17 LEARNING OBJECTIVES Describe the accounting framework for financial assets. Understand the accounting for debt investments at amortized cost. Understand the accounting for debt investments at fair value. Describe the accounting for the fair value option. ACCOUNTING FOR FINANCIAL ASSETS Financial Asset Cash. Equity investment of another company (., ordinary or preference shares). Contractual right to receive cash from another party (., loans, receivables, and bonds). IASB requires that companies classify financial assets into .
