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Methods to Account for Debt Securities, Methods to Account for Equity…
Methods to Account for Debt Securities
FV-IN
Trading :
Fair Value Adjustment (FVA)
affect the balance sheet
Unrealized Holding Gain or Loss
Fair Value - Amortized Cost
Affect Net Income
FV-OCI
AFS
Fair Value Adj
Other Comprehensive Income
Amortized Cost
Held-to-Maturity Securities
Positive intent to hold to maturity
ability to hold to maturity
HTM at Amortized at Cost
Recognize at amortized cost (par, discount, or premium)
Premium (Market rate<Stated rate)
Face Value (Market Rate = Stated Rate)
Discount (Market rate> Stated Rate)
Ignore changes in fair value
effective interest method
Investor receives cash interest based on STATED rate
Investor recognizes interest revenue based on the MARKET rate
Interest revenue = market rate at bond purchase x amortized cost at the beginning of period
straight-line interest method
Interest Revenue
Stated Interest + Discount amortized
Stated interest - Premium amortized
Methods to Account for Equity Securities
FV-NI
Equity Method
Consolidation