Page 41 - FINAL CFA I SLIDES JUNE 2019 DAY 7
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Session Unit 7:
25. Understanding Balance Sheets
Example: Classification of investment securities, p.89
Triple D Corporation purchased a 6% bond, at par, for $1,000,000 at the beginning of the year. Interest
rates have recently increased and the market value of the bond declined $20,000. Determine the
bond’s effect on Triple D’s financial statements under each classification of securities.
• Held-to-maturity security: reported on the balance sheet at $1,000,000. Interest
income of $60,000 [$1,000,000 × 6%] is reported in the income statement.
tanties
• Trading security: balance sheet at $980,000. The $20,000 unrealized loss and
$60,000 of interest income are both recognized in the income statement.
• Available-for-sale security: balance sheet at $980,000. Interest income of $60,000 is
recognized in the income statement. The $20,000 unrealized loss is not recognized in
the income statement. Rather, it is reported as a change in stockholders’ equity.
Non-Current Liabilities, p89
• Long-term financial liabilities
• Deferred liabilities
