1 Investments Sid Glandon, DBA, CPA Associate Professor of Accounting The University of Texas at El Paso

2 Debt Securities Classified as trading Held for sale in near term to generate income Classified as available-for-sale Not classified as held-to-maturity or trading securities Classified as held-to-maturity Positive intent and ability to hold to maturity

3 Fact Pattern: Investment in Debt Securities

4 Debt Securities, Classified as Trading Valuation Fair value Unrealized holding gains or losses Recognized in net income Other income Interest earned Realized gains and losses from sale

5 Debt Security, Classified as trading

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11 Debt Security, Classified as available-for-sale Valuation Fair value Unrealized holding gains or losses Recognized as other comprehensive income Recognized as separate component of stockholders equity Other income Interest earned Realized gains and losses from sale

12 Debt Security, Classified as available-for-sale

13 Debt Security, Classified as available-for-sale

14 Debt Security, Classified as available-for-sale

15 Debt Security, Classified as available-for-sale

16 Debt Security, Classified as available-for-sale

17 Debt Security, Classified as available-for-sale

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19 Debt Securities, Classified as Held-to-Maturity Valuation Amortized cost Unrealized holding gains or losses Not recognized Other income Interest earned Realized gains and losses from sale

20 Equity Securities Ownership interests Include rights to buy or sell ownership Extent of ownership determines accounting treatment for equity securities

21 Degrees of Control

22 Fact Pattern: Investment in Equity Securities

23 Equity Security, Classified as available-for-sale Less than 20% ownership interest Recorded at cost Valued and reported at fair value Dividends are recognized as income Unrealized holding gains and losses Part of comprehensive income A component of stockholders equity

24 Equity Security, Classified as available-for-sale

25 Equity Security, Classified as available-for-sale

26 Equity Security, Classified as available-for-sale

27 Equity Security, Classified as available-for-sale

28 Equity Security, Classified as available-for-sale

29 Equity Security, Classified as available-for-sale

30 Trading Less than 20% ownership interest Recorded at cost Valued and reported at fair value Dividends are recognized as income Unrealized holding gains and losses Recognized in net income

31 Equity Security, Classified as trading

32 Equity Security, Classified as trading

33 Equity Method Between 20% and 50% ownership interest Substantive economic relationship Investors carrying value Increased by proportionate share of earnings Decreased by Dividends, and Proportionate share of losses

34 Consolidation More than 50% voting interest Investor is parent Investee is subsidiary Investor prepares consolidated financial statements Investor accounts for investment on its books using the equity method

35 Investments In Equity Securities

36 Accounting by Category

37 Transfers of Classifications