Reference no: EM131223031
Need a discussion response to the following post
In order to know which accounting to use for a company, you should also understand their investment objective.
If the company’s intention is to turn around the investment and generate a short term profit, then this is considered the asset is a srading Security and is reflected on the Income Statement; unrealized gain/loss are reflected on the Balance Sheet as an allowance for short-term investment.
If the company intends to sell an asset and asset and recognize a gain/loss, it is considered an asset-available-for-sale and the gain/loss is not reflected on the Income Statement, but rather the balance sheet; under comprehensive income, which rolls up to stockholder.
An investment that is held-to-maturity is a debt security that the company intends hold until it fully matures. Any the gain or losses will only be recognized it is sold. A bond is a good example of a held-to maturity investment.
A debt security involves a creditor where the financial instrument is to be repaid. The receivable is usually considered as debt receivables on the balance sheet and the repayment of the principal and interest reduced the receivable. An equity security the company has an ownership position (such as shares of a stock). Dividends are received and profits are recognized from capital gains at the time of sale.
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Explain the concept of creep and viscoelasticity
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Unrealized gain-loss are reflected on the balance sheet
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