RSM221H1 Chapter 9: Investments I
9 Nov 2016
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Companies hold investments for 1 of 2 reasons: to have the capital appreciate, or, to earn dividends and/or income. 2 main investments: debt and equity instruments. Debt instruments include debt securities whose prices are normally quoted in an active market: generally have contractual requirements regarding repayment of principal and payment of interest, the rights depend on the specific debt instrument. Motivations that companies have for investing: the returns provided by investments through interest, dividends, or capital appreciation, st returns vs. lt returns, corporate strategy. Can be labelled as available for sale or held for trading. Provide info of the nature and risks. How investments are accounted for depend on the type of instruments, management"s interest, company strategy, and the ability to reliably measure the investment"s fv. Must be recognized and measure initially at their fv at acquisition. The price of a debt instrument is quoted as a percentage of its par or face value.
