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Investments

FAR Chapter 14 · Area II · Blueprint II.E

Companies park spare cash in bonds and shares, and sometimes buy a large stake in another business. How the investment is measured depends on what it is and why it is held. The Blueprint asks you to account for investments at fair value through net income, at fair value through other comprehensive income and at amortized cost, to measure impairment and credit losses, and to apply the equity method. The first job in any question is to put the investment in the right box.

In this chapter

1. Sorting investments into the right box
2. Debt at amortized cost and the effective interest method
3. Debt at fair value
4. Equity securities at fair value
5. Credit losses and impairment of debt securities
6. The equity method
7. Paying more than book value

This chapter has 7 lessons, 50 practice MCQs with explanations and 20 simulations, plus flashcards and a recall sheet.

What this chapter covers

• Fair value through net income and OCI
• amortized cost
• impairment and credit losses
• the equity method

Chapter 13: Property, plant and equipment · Chapter 15: Intangible assets