Long-Term Investment in Debt Securities: The long term investments in debt securities is the pooling of funds by the investors in the debt instruments which are to be matured minimum after one year and includes bonds and various types of debt instruments which are subject to amortization with respect to their premiums and discounts. The principal amount of funds employed in such debt securities are payable as the end result of the operating cycle or one year, whichever span is longer. To determine: The circumstances where long-term investments in debt securities reported at cost and adjusted for amortization of difference between cost and maturity value. Solution: The long-term investment in debt securities in the form of held-to maturity securities are reported at cost at the time of purchase. The held-to maturity securities are basically non derivative assets which are popularly in the form of bonds and investments which get matured after a time period of at least one year or more. The income generated in the form of interest is recorded as and when it is earned. The held-to maturity securities are recorded in the balance sheet at its amortized value after deducting the impairment costs without any fair value adjustments, irrespective of the portfolio being short-term or long-term. The interest earned from these securities form part of income statement of the firm, on the other hand the difference between the cost and maturity values form part of combined comprehensive income till they are ultimately realized.

9th Edition

ISBN: 9781266419607

Author: Wild

Publisher: MCG CUSTOM

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