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Section 4210: Investments in Debt and Equity Securities
[U.S. GAAP Codification Topic]
320 Investments - Debt and equity securities
320-10 Overall
825-20 Registration payment arrangements
[U.S. GAAP before the Codification]
SFAS 12, December 1975, Accounting for Certain Marketable Securities, Superseded by SFAS 115, in 1993
SFAS 65, September 1982, Accounting for Certain Mortgage Banking Activities
SFAS 114, May 1993, Accounting by Creditors for Impairment of a Loan, an amendment of FASB Statements No. 5 and 15
SFAS 115, May 1993, Accounting for Certain Investments in Debt and Equity Securities
FSP FAS 115-2, April 2009, Recognition and Presentation of Other-Than-Temporary Impairments
SFAS 119, October 1994, Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments, Superseded by SFAS 133 in 1998
1. Investments in Debt and Equity Securities
(1) Debt securities: represent creditor relationship
(2) Equity securities: represent ownership interest
2. Investments in Equity Securities
(1) more than 50% of voting power
--> prepare consolidated financial statements
(2) 20% or more, but no more than 50%
--> equity method accounting
(3) less than 20%
--> classified as either (a) or (b)
(a) trading securities
(b) available for sale securities
3. Investments in Debt Securities
(1) Held-to-maturity securities
--> intent and ability to hold until maturity
(2) No intent or ability to hold until maturity
--> classified as either (a) or (b)
(a) trading securities
(b) available for sale securities
4. Characteritics of Trading Securities
(1) "active and frequent" buying and selling
(2) profits on "short-term price differences"
5. Available for Sale (AFS) Securities
Securities not classified as either (a) or (b)
(a) Trading Securities
(b) Held-to Maturity (HTM) Securities
6. Measurement of Investments in Securities
(1) Trading Securities: Fair Value
(2) AFS Securities: Fair Value
(3) HTM Securities: Amortized Cost
7. Changes in Fair Value: Unrealized holding gains or losses
(1) Trading Securities: recognized in earnings
(2) AFS Securities: recognized in Other Comprehensive Income (OCI), not in earnings
(3) HTM Securities: not recognized
8. Impairment of AFS and HTM Securities
If the decline in fair value is "other than temporary"
--> recognize impairment losses in earnings
9. FASB Staff Position FAS 115-2, April 2009
Recognition and Presentation of Other-Than-Temporary Impairments
10. Other-Than-Temporary Impairments of Debt Securities
--> classified as "held-to-maturity" or "available-for-sale" securities
--> Apply FSP FAS 115-1 as revised by FSP FAS 115-2 in April 2009
11. Other-Than-Temporary Impairments of Equity Securities
--> classified as "available-for-sale" securities
--> Apply SAB Topic 5M as revised by SAB 111 in April 2009
--> SAB: SEC Staff Accounting Bulletin
12. For investments in securities classified as "held-to-maturity" or "available-for-sale"
--> If the decline in fair value below amortized cost
--> is other than temporary,
--> the investments are impaired
13. FSP FAS 115-1, November 2005
The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments
--> provides guidance to determine whether the decline in fair value
--> is other than temporary
14. FSP FAS 115-2 revised FSP FAS 115-1 in April 2009
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