chapter 9 condensed notes.docx

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Department
Accounting & Financial Management
Course
AFM 291
Professor
Robert Ducharme
Semester
Fall

Description
Chapter 9 Condensed Notes IFRS Requirements  Amortized cost used only if firm's business model is to manage the instrument as if held to maturity and under contractual cash flow  Otherwise use FV-NI  Proposal: if held for longer term strategic reasons, accounted for under FV-OCI without recycling  Fair value to correct an accounting mismatch Cost Model: Equity Investment  Changes in investment's market value have no effect on balance sheet/IS until sold  Acquisition; recognize at fair value (transaction costs)  Report at cost  Dividends recognized as dividend income  Disposal: difference between the original cost and final market is realized gain/loss reported on net income Amortized Cost Model  Used for investments in another firm's debt security  At acquisition, recognizes the cost of investment at fair value (transaction cost)  Report at amortized cost (recognize, interest receivable, interest income and discount/premium by adjusting carrying amount of investment)  Disposal: bring accrued interest and discount/premium amortization up to date and derecognize investment and report gain/loss on disposal in net income Sale of Investments  Discount (premium) is amortized from last dat
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