To help you become familiar with the accounting standards, this case is designed to take you to the FASB’s Web site and have you access various publications. Access the FASB’s Web site at www.fasb.org. Click on “Pronouncements & EITF Abstracts.”
In this chapter, we discussed issues relating to investing in debt and equity securities. For this case, we will use Statement of Financial Accounting Standards No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” Open FASB Statement No. 115.
1. In paragraph 13, the reporting of unrealized gains and losses is discussed. How are unrealized gains and losses accounted for with trading securities? With available-for-sale securities?
2. Paragraph 16 discusses the accounting for securities that may be impaired. If available-for-sale and held-to-maturity securities are determined to be permanently impaired, how is that impairment to be accounted for? Why aren’t trading securities included in the discussion in paragraph 16?