Investment
Debt Securities
1. Held to maturity
• At amortized cost
•No unrealized gain or loss
2. Available for sale
• Fair value
• Unrealized gain or loss apart from net income
• Change in fair value
3. Trading securities
• Fair value
• Unrealized gain or loss part of net income
Equity securities
1. Holdings of less than 20 percent (fair value method)—investor has passive interest.
2. Holdings between 20 percent and 50 percent (equity method)—investor has
significant influence.
3.
Holdings of more than 50 percent (consolidated statements)—investor has controlling
interest.
Derivatives
1. Forward Contract
• Dell mau beli saham Google, tapi ga punya duit. Dell bikin contract ama broker
buat 10.000 lbr saham, 110 per lbr, 3 bulan berikutnya.
•Dell wajib bayar dan berhak dapet sahamnya 3 bln lagi.
• Kalo harga naik Dell untung, turun Dell rugi.
2. Option contract
• Dell berhak dapet saham, tapi ngga wajib beli.
• Kalo ga jadi beli karena turun, tetep kena cost atas option.
Derivatives derive value from other asset that’s underlying (stock).
In summary, companies follow these guidelines in accounting for derivatives.
1. Recognize derivatives in the financial statements as assets and liabilities.
2. Report derivatives at fair value.
3. Recognize gains and losses resulting from speculation in derivatives immediately in
income.
4.
Report gains and losses resulting from hedge transactions differently, depending on the type
of hedge.
