What is ASC Topic 321?
Topic 321, “Investments—Equity Securities,” of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) provides the ability to measure certain equity securities without a readily determinable fair value at cost, minus impairment, if any.
What are the three categories of investments identified in authoritative accounting literature?
The standard requires classification of investments into one of three categories: held to maturity, trading or available for sale.
What is the measurement alternative?
Back to the measurement alternative, which is the focus of this blog. If this alternative method is not elected, an equity security must be measured at fair value with any changes in fair value immediately included in earnings.
What is ASC 323?
ASC 323-10 provides guidance on the application of the equity method of accounting to investments within the Subtopic’s scope. The equity method is an appropriate means of recognizing increases or decreases measured by generally accepted accounting principles (GAAP) in the economic resources underlying the investments.
How will you classify the investments for balance sheet purpose?
Asset Classification Investments are seen as current assets if the firm intends to sell them within a year. Long-term investments (also called noncurrent assets) are assets that they intend to hold for more than a year.
What is the purpose of the ASC?
In accounting, ASC stands for Accounting Standards Codification as defined by the Financial Accounting Standards Board (FASB). FASB’s purpose is to establish best practices for GAAP accounting professionals and companies who follow these principles.
Why is Codification is important in accounting?
The Codification helps decrease the amount of time and effort required to resolve accounting research issues. For financial statements issued for interim and annual periods ending after September 15, 2009, footnote references must be modified to remove specific references to outdated GAAP.