RSM221H1 Chapter Notes - Chapter 9: Cash Cash, Real Estate Transfer Tax, Financial Instrument
Document Summary
Accounting for investments usually requires them to be recognized and measured initially at their fair value at acquisition. Choices are to expense or to add them to the cost of assets acquired: cost-based model capitalized it, fair value model expense. Three major models of accounting for investment: cost/amortized cost model, fair value through net income model (fv-ni, fair value through other comprehensive income model (fv-oci) Cost (equal to fair value + transaction costs) Report unrealized holding gains and losses (changes in fair value): Transfer total realized gains/losses to net income (recycling) or directly to retained earnings (no recycling) The amortized cost model applies only to investment in debt instruments and long-term notes and loans receivable. Cost model may applied to investments in equity instruments of other companies (the equity is not actively traded) Yearly income is recognized as investment income in net income. When the asset is sold, recognize a gain or loss from disposal in net income.
