Example from AIS Seminar Workbook
INVESTMENTS IN DEBT and EQUITY SECURITIES
FASB Codification Paragraph 320
Investment in stock carried on the equity basis and investments in
consolidated subsidiaries are not covered by this pronouncement. It applies to
other investments in equity securities that have readily determinable values and
to all investments in debt securities.
HELD TO MATURITY securities are
debt securities which the enterprise has the intent and ability to hold to
maturity. These are reported at amortized cost.
TRADING securities are
debt and equity securities held principally for selling them in the near term.
They are reported at fair value, with unrealized gains and losses included in
AVAILABLE FOR SALE securities include all other debt and
equity securities, and are reported at fair value. Unrealized gains and losses
are excluded from earnings and reported in a separate component of shareholders'
Trading securities are current assets. Cash flows from trading
securities are operating cash flows.
The usual current/noncurrent
criteria are used to determine the category in which to report held to maturity
and available for sale securities. Cash flows from purchases and sales of
available for sale and held to maturity securities are investing cash flows.
The transfer of a security between categories of investments is
accounted for at fair value. At the date of the transfer, if the security is
- Into trading, unrealized holding gain or loss is recognized in earnings
- From trading, unrealized holding gain or loss will have already been
recognized and is not reversed.
- From held to maturity into available, unrealized holding gain or loss is
recognized as a separate component of shareholders' equity.
- From available into held to maturity, unrealized holding gain or loss
continues to be reported in a separate component of shareholders' equity, but
is amortized over the remaining life as an adjustment to yield.
For available for sale or held to maturity securities, a decline in value
below carrying value that is other than temporary is recognized as a loss and
the cost basis of the individual security is written down to fair value. The new
cost basis is not changed for subsequent recoveries in fair value.
Now that you have read this example of a summary from our
seminar workbook, you may be interested in what you might do next to prepare for
the CPA exam.
Many people choose to concentrate their efforts on two or
three sections of the exam to increase their chance of earning conditional
credit. One way of doing this is to concentrate on those areas in which you are
strongest. However, there are other approaches.
updating our books we see the frequency of changes taking place in the exam. Law
changes the least rapidly, and ARE (tax) the most rapidly. If your accounting
classes are recent, you might consider putting more effort into ARE and the
least effort into law. It makes sense to get the areas out of the way where your
classroom work becomes "obsolete" due to new rules most quickly. FAR probably
changes a little faster than Auditing, although the AICPA has been pretty active
recently with new SAS and SSAE pronouncements.
Many people like to take
our seminar after doing some self study on their own. They save a list of
questions while studying and take advantage of the seminar to ask us to explain
topics that are unclear to them.
By the way, Ken and I carry laptops on
the road. We invite people in our courses to use e-mail to ask questions
(telling us the page they are looking at in our book). We respond quickly to
those and it saves a lot of "telephone tag".
Good luck with your studies!
For information on self study books, click on self study books. To register for a
course or order self study books, call toll free (800) 635-9442 Monday through
Friday from 9 to 5 Mountain time. The regular phone number is (208) 233-3222 and
the fax number is (208) 234-2154. If you would like to know more about AIS, see
Accounting Institute Seminars® (AIS) provides intensive review
courses for people taking the United States CPA examination. These seminars are
taught in person by one of the two authors of the course and are offered in a
number of cities in the U.S. each year.
For information on the seminars,
return to the CPA Exam Home Page at
We also offer self study CPA exam books written by the
same authors. Most are available on-line, for download to your computer. The
electronic version is less expensive than paper books. You can magnify pages on
your screen, fill the screen (view - full screen), search for terms (tools -
find), and print pages. Best of all, you can start studying it now instead of
waiting days for it to arrive!
Here is the list of our currently
available E-BOOKS CPA REVIEW.
For more information on e-books or for paper copies, refer to CPA REVIEW SELF STUDY BOOKS.
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