From the course: Financial Accounting Foundations

Unlock the full course today

Join today to access over 22,600 courses taught by industry experts or purchase this course individually.

Investment securities and derivatives

Investment securities and derivatives

From the course: Financial Accounting Foundations

Start my 1-month free trial

Investment securities and derivatives

“

- It is often the case that one company will store its temporary excess cash by investing in the stocks and bonds of other companies. And some companies invest in the stocks and bonds of other companies as part of their business strategy, seeking to earn returns through careful investing. After making the investments, the value of the investments will move up and down daily as stock and bond prices fluctuate. Now the important accounting question is this. Should the investment security assets be reported in the balance sheet at their original cost or at their current market value? Well in a break from accounting tradition, almost all investment securities are reported in the balance sheet at current market value, not cost. For example, on December 31st, 2018, Berkshire Hathaway, which is the large investment company run by Warren Buffet, owned a portfolio of stocks in other companies, including American Express, Apple…

Contents