Trading investments are
Investments are reported by the investing company on its balance sheet , classified into current and non-current portion. Investments which are expected to be sold within next 12 months are called short-term investments while investments other than short-term investments are called long-term investments. Some investments, which are can be easily converted to cash with negligible fluctuation in its value, are classified as cash equivalents.
Investments can be made in debt securities, equity securities, commodities, derivative securities, etc. Debt securities are financial instruments that represent right to a determined stream of cash flows for a definite period of time. For example, government bonds, corporate bonds, municipal bonds, notes receivable, etc.
Equity instruments are securities that represent residual ownership interest in a company, for example, shares of common stock, etc. They are contracts whose value depend on another variable, for example, price of a common share of a company or its bond price or on price of a commodity, etc.
However, new accounting standards IFRS 9 require classifying debt investments into two categories: They require such equity investments to be accounted for either as a fair value through profit and loss or b fair value through other comprehensive income. You are a Treasury Accountant at Flow, Inc. A newly appointed Treasury Manager embarked on an aggressive investment spree. During the year, the company entered into the following transactions:.
Interest income is recognized in the period in which it is earned. Held for trading investments are reported at fair value and any resulting gain or loss or interest income is recognized in income statement. Equity securities Accounting for equity investments depends on the extent of ownership: No controlling interest and no significant influence: Unrealized gains or losses is recognized in other comprehensive income.
Realized gains and losses and dividends are recognized in profit and loss. Dividend income is recognized in profit and loss. Designated at fair value through profit and loss: During the year, the company entered into the following transactions: