Wiley GAAP 2008

Concepts, Rules, and Examples

Short‐Term Investments

Short‐term (or temporary) investments usually consist of debt securities and equity securities with readily determinable fair values. Accordingly, investments that are held for purposes of control of another entity or pursuant to an ongoing business relationship, for example, stock held in a supplier, would be excluded from current assets and would instead be listed as other assets or long‐term investments (discussed in detail in Chapter 12).

Debt securities and equity securities with readily determinable fair values

FAS 115, Accounting for Certain Investments in Debt and Equity Securities, governs the accounting for all debt securities and for equity securities with readily determinable fair values.

Included in the scope of FAS 115	Excluded from the scope of FAS 115
All debt including loans that meet the FAS 115 definition of a “security,” even if the loan involved a modification of terms in connection with a troubled debt restructuring (FTB 94‐1)	Unsecuritized loans
Mortgage‐backed securities	Equity securities that, absent election of the fair value option permitted by FAS 159, would be required to be accounted for using the equity method
Equity securities with readily determinable fair values	Investments in consolidated entities
Rights to purchase equity securities (e.g., warrants and call options) or to sell equity securities (e.g., put options)	Not‐for‐profit organizations (subject, instead to FAS 124)
An instrument otherwise subject ...