How to Account for Debt Investments and Explain How to Account for Share Investments and Reported in Financial Statements?

Abstract

In this day and age, many people or companies make decision to invest. Companies have different motivations for investing in the form of debt investments and share investments issued by other companies. The first motivation is to get a high rate of return. Another motivation to invest is to maintain certainty of operation or financial relationship with other companies. The value of debt investments and share investments always fluctuating. The Company can assess its investment at the acquisition price (cost), or at a fair price (fair value), or with which value is lower between the acquisition price and the net realized value (lower of cost or net realizable value). Many argue that fair value assessment is the best way because it shows the cash value that can be expected to be realized. Investors will record debt investment at the time of acquisition, receive interest (including accrued interest) and sell it. Gain/loss on sale is recorded as other income and expense in the income statement. Investors will record share investment at the time of acquisition, receipt dividends and sell them. For the purposes of assessment and reporting as of the date of the financial statements, debt investment divided into two categories: Trading Securities, Held for Collection Securities. Share investments are also divided into two categories: Trading Securities, Non-Trading Securities. In full, the investment assessment for debt investments and for share investments will be explained in more detail.