On April 15, the City of Old Putz invests its available excess cash with an investment...

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On April 15, the City of Old Putz invests its "available" excess cash with an investment broker. The investment broker then purchases 90-day commercial paper from a set of "blue chip" companies. On June 30, the last day of the City's fiscal year, the City planned to "roll over" the commercial paper when they mature. However, interest rates fell dramatically in late June resulting in a lower value for the "maturing" commercial paper. More importantly, the City now expects to receive a much lower return on its investment after reinvestment. Should the City make any disclosures or adjustments regarding these transactions? On April 15, the City of Old Putz invests its "available" excess cash with an investment broker. The investment broker then purchases 90-day commercial paper from a set of "blue chip" companies. On June 30, the last day of the City's fiscal year, the City planned to "roll over" the commercial paper when they mature. However, interest rates fell dramatically in late June resulting in a lower value for the "maturing" commercial paper. More importantly, the City now expects to receive a much lower return on its investment after reinvestment. Should the City make any disclosures or adjustments regarding these transactions?

Answer rating: 100% (QA)

The City of Old Putz should consider making disclosures or adjustments in its financial statements to accurately reflect the impact of the lower value ... View the full answer