Royal Bank of Canada is one of the largest banks in Canada. According to its 2020 annual report, it had more than 86,000 employees serving 17 million customers throughout the world. The bank’s business largely involves borrowing money and lending it to others, but at any given time it will have a large amount of money invested in securities when that money is not out on loan. It also acts as an investment dealer, buying investments from one client and selling them to another. The company reported the following information in its 2020 financial statements (in millions of dollars):

Instructions 

a. In your opinion, why does the Royal Bank have a higher percentage of its investments held for trading purposes in debt instruments than in equity instruments? 

b. How will the debt instruments be valued on the Royal Bank’s balance sheet? 

c. The Royal Bank also reported other investments at fair value through other comprehensive income. What are the advantages of reporting gains and losses in other comprehensive income instead of profit? What are the disadvantages?  

Transcribed Image Text:

Trading investments at FVTPL Debt instruments Equity instruments 2020 $ 92,454 43,617 $136,071 2019 $105,081 41,453 $146,534