Q1. Cosmo Inc. (Cosmo) invests in two portfolios – Portfolio 1 and Portfolio 2. Portfolio 1 contains securities with an overall intent to    

profit within a month or two. Portfolio 2 contains equity securities with a moderate amount of acquisition and disposition activity.

Which of the following treatments of Cosmo’s reporting of the minority passive investments in Portfolios 1 and 2, respectively, is most accurate?

Portfolio 1                  Portfolio 2

A)Unrealized amounts reported on income statement.      Assets reported at fair value.

B)Unrealized amounts reported on balance sheet.    Assets reported at fair value.

C)Unrealized amounts reported on income statement.      Assets reported at cost.

Q2. You are evaluating two firms, A and B, which have passive intercorporate investments. In each case the ownership levels are   

less than 20%, and they have no significant influence over the firms in which they have invested. However, Firm A has invested   

via a negotiated transaction in shares that are not publicly traded, and for which no liquid secondary market exists. Firm B has

purchased shares that are publicly traded, and has identified these as trading securities. Which of the following statements most accurately describes the correct method of accounting for these securities under both U.S. GAAP and IAS rules?

A)   Firm A should account for its investment using the market method, while firm B should account for its investment using the cost method.

B)   Firm A should account for its investment using the cost method, while firm B should account for its investment using the market method.

C)   Firm A should account for its investment using the cost method, and firm B should account for its investment using the cost method.

答案和详解如下：

Q1. Cosmo Inc. (Cosmo) invests in two portfolios – Portfolio 1 and Portfolio 2. Portfolio 1 contains securities with an overall intent to    

profit within a month or two. Portfolio 2 contains equity securities with a moderate amount of acquisition and disposition activity.

Which of the following treatments of Cosmo’s reporting of the minority passive investments in Portfolios 1 and 2, respectively, is most accurate?

Portfolio 1                  Portfolio 2

A)Unrealized amounts reported on income statement.      Assets reported at fair value.

B)Unrealized amounts reported on balance sheet.    Assets reported at fair value.

C)Unrealized amounts reported on income statement.      Assets reported at cost.

Correct answer is A)

Portfolio 1 contains held-for-trading securities because it is clear that the securities are acquired with the intent to profit over the near term. Therefore, the unrealized gains and losses would be reported immediately in the income statement.
Portfolio 2 contains available-for-sale securities. There are no debt securities and therefore, it cannot contain held-to-maturity securities. As well, there is no indication that the securities are acquired with the intent to profit over the near term. By default, the correct classification would be available-for-sale. Therefore, the securities (assets) would be reported at fair value.

Q2. You are evaluating two firms, A and B, which have passive intercorporate investments. In each case the ownership levels are   

less than 20%, and they have no significant influence over the firms in which they have invested. However, Firm A has invested   

via a negotiated transaction in shares that are not publicly traded, and for which no liquid secondary market exists. Firm B has

purchased shares that are publicly traded, and has identified these as trading securities. Which of the following statements most accurately describes the correct method of accounting for these securities under both U.S. GAAP and IAS rules?

A)   Firm A should account for its investment using the market method, while firm B should account for its investment using the cost method.

B)   Firm A should account for its investment using the cost method, while firm B should account for its investment using the market method.

C)   Firm A should account for its investment using the cost method, and firm B should account for its investment using the cost method.

Correct answer is B)

Passive investments in firms whose shares are not publicly traded should be accounted for using the cost method. Passive investments in publicly traded securities that have been acquired for the purpose of trading should be accounted for using the market method.

kana

三级考试重要教材《期权、期货和其它衍生产品》