Tag Archives: asc 320

Investments-Debt and Equity Securities, ASC 320

Investments-Debt and Equity Securities
–> FSP FAS 115-2, April 2009

Other-Than-Temporary Impairments

FASB Staff Position FAS 115-2, April 2009
“Recognition and Presentation of Other-Than-Temporary Impairments”

SFAS 115, May 1993
“Accounting for Certain Investments in Debt and Equity Securities”

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

 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

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

FSP FAS 115-2, 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

FSP FAS 115-2 revised FSP FAS 115-1 in April 2009

 

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Transfers of Securities: Between Categories, ASC 320

Reclassification of Investments in Securities

1. All securities reclassified
–> from one category to another
–> are transferred at fair value

2. From Trading to Other
–> Unrealized Holding Gain and Loss (HGL) at transfer date
–> already recognized in earnings
–> not reversed

3. From Other to Trading
–> Unrealized Holding Gain and Loss (HGL) at transfer date
–> recognized in earnings immediately

4. From HTM to AFS
–> Unrealized Holding Gain and Loss (HGL) at transfer date
–> recognized in OCI

5. From AFS to HTM
–> Unrealized Holding Gain and Loss (HGL) at transfer date
–> stays in OCI
–> amortized over remaining life of security

6. Following transfers should be rare
–> from HTM to Other
–> from Trading to Other
–> from Other to Trading

7. Classification
–> reassessed at the end of each reporting period

OCI: Other Comprehensive Income
Trading: Trading Securities
AFS: Available-for-Sale Securities
HTM: Held-to-Maturity Securities
HGL: Holding Gain and Loss
FVPL: Financial Assets and Financial Liabilities at Fair Value through Profit or Loss

IAS 39 Before October 2008 Amendment

Financial instrument
–> not allowed to be transferred into FVPL
–> not allowed to be transferred out of FVPL

October 2008 Amendment to IAS 39

Financial instrument
–> not allowed to be transferred into FVPL
–> after initial recognition

Financial instrument
–> not allowed to be transferred out of FVPL
–> if it was designated as FVPL before

Derivative
–> not allowed to be transferred out of FVPL

Financial instrument
–> currently classified as “held-for-trading”
–> allowed to be transferred out of FVPL,
–> if certain conditions are met

Financial instrument
–> currently classified as “Available-for-Sale”
–> allowed to be transferred to Loans and Receivables,
–> if certain conditions are met

Reasons for Amendments in October 2008
–> to be consistent with U.S. GAAP

[U.S. GAAP, SFAS 115]
Reclassification out of Trading
–> allowed, in rare situations

[U.S. GAAP, SFAS 65]
Reclassification
–> out of Mortgage Loans Held for Sale
–> into Mortgage Loans Held for Long Term Investments
–> allowed, if certain conditions are met

 

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Overview of Investments in Other Entities, ASC 320

Investments in Other Entities

1. Investments in debt securities
2. Investments in equity securities that have (A)
(A) readily determinable fair value
3. Investments in common stock of subsidiaries
–> subsidiaries: more than 50% of voting rights
4. Investments in common stock with significant influence
–> significant influence: 20% or more up to 50% of voting rights
5. Investments in partnerships, unincorporated joint ventures, limited liability companies
6. Investments in common stock other than previous cases
7. Beneficial investments in securitized financial assets

Investments in debt securities
–> Apply asc topic 320: Investments – Debt and Equity Securities
–> SFAS 115

Investments in equity securities that have (A)
(A) readily determinable fair value
–> Apply asc topic 320: Investments – Debt and Equity Securities
–> SFAS 115

Investments in common stock of subsidiaries
–> Apply asc topic 810: Consolidation
–> ARB 51, SFAS 160

Investments in common stock with significant influence
–> Apply asc topic 323-10: Investments – Equity Method and Joint Ventures
–> APB 18

Investments in partnerships, unincorporated joint ventures, limited liability companies
–> Apply asc topic 323-30: Partnerships, Joint Ventures, Limited Liability Entities
–> AICPA Accounting Interpretation (AIN) APB 18

Investments in common stock other than previous cases
–> Apply asc topic 325-20: Cost Method Investments
–> APB 18

Beneficial investments in securitized financial assets
–> Apply asc topic 325-40: Beneficial Interests in Securitized Financial Assets
–> FASB Emerging Issues Task Force (EITF) Issue No. 99-20

 

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