Identify the three categories of debt securities and describe the accounting and reporting treatment for each...

Identify the three categories of debt securities and describe the accounting and reporting treatment for each category.

Solutions

Expert Solution

There are 3 types of Debt Securities they are:

--1)Held to Maturity

Where the company has an intention and ability to keep until maturity . There is regulations to identify as Held to Maturity security such as,only Debt security can be kept aHold to Maturity cannot do for equity Security.

Accounting and reporting

The should account for Hold to Maturity security under Amortized Cost method and should be recorded in Balance Sheet.

-2)Trading Debt Security

this type of security are acquired for primary intention to sale to earn short term profit from speculation in market Price.

Accounting and Reporting

these securities are recorded for fair value in Balanve sheet.

And Account for any unrealised gain/loss in income statement(due to change in traded market Value)

-3)Available For sale

Inorder to categorize as available to sale company has to follow sale criteria.. And there should be intention to sell in 12months time.

Accounting and Reprting

Record Fair Value in income Statement

And Recognise gain or loss in Other Comprehensive incoincome(OCi) until is sold (for change in faur value of Mv)

ekkarill92 answered 1 year ago

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