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Checklist of Stuff to Know for Chapter 17 Investments in Debt Securities: What are debt securities?

? Define and give examples. Be able to define and know the differences listed in Illustration 17-2 between: o Held-to-maturity debt securities o Trading debt securities o Available-for-sale debt securities What is the does it mean to say a security is valued at amortized cost? What is the does it mean to say a security is valued at fair value? Know how to account for (including journal entries) the following transactions in regard to held-to-maturity debt securities: o Initial purchase o Record interest & amortize premium or discount Know how to account for (including journal entries) the following transactions in regard to available-for-sale debt securities: o Initial purchase o Record interest & amortize premium or discount o Fair value adjustment o Sale Know how to account for (including journal entries) the following transactions in regard to trading debt securities: o Initial purchase o Record interest & amortize premium or discount o Fair value adjustment o Sale Compare and contrast how unrealized gains and losses are handled for available-for-sale and trading securities. Compare and contrast the financial statement presentation of available-for-sale, trading, and held to maturity securities. Investments in Equity Securities: What are equity securities? Define and give examples. The degree to which the investor acquires an interest in an investee determines the accounting treatment for the equity investment. Know the differences between each of the following categories: o Less than 20% o Between 20-50% o More then 50% Holdings of Less than 20% can be broken up into available for sale and trading securities. Compare and contrast these two types of securities. Know how to account for (including journal entries) the following transactions: o Purchase o Dividend Revenue o Fair Value Adjustment

o Sale Holdings between 20% and 50% are accounted for under the equity method. Know how to account for (including journal entries) the following transactions: o Purchase o Dividend Revenue o Income of Investee Holdings of greater than 50% are accounted for with consolidation. What are consolidated financial statements?

Fair Value Option: What is the fair value option? When must a company choose to use the fair value option? If the fair value option is elected, what would be the differences in the reporting done for the following types of securities: o Available-for-sale Securities o Equity Method Securities o Financial Liabilities Impairment, Reclassification Adjustments, and Transfers between Categories: What is impairment? When should impairment be taken on an investment? What is a reclassification adjustment, and why would it be necessary? If a company wishes to change the category of an investment, at what value should the newly classified investment be recorded (See Illustration 17-30)? Fair Value Controversy: What are some of the major issues surrounding fair value accounting? In addition to the chapter, see also the posted link to the AICPA FAQs and the Executive Summary of Ryan (2008). Fair Value Measurements and Disclosures (Appendix C): What are two reasons that additional disclosure is required for fair value accounting? What are the three levels of reliability in valuation (see also Chapter 2 and the posted link to the AICPA FAQs)? Be able to give examples of items whose fair value would be measured at each of these levels. IFRS: What are the similarities and differences between IFRS and U.S. GAAP for investments? Appendix 17A & Appendix 17B will not be covered on the exam.