📖 Overview
This standard addresses accounting treatment for investments in debt and equity securities. Investments are classified as: held-to-maturity, available-for-sale, or trading. Each category has different measurement and impairment models.
🎯 Scope
This standard applies to an entity's investments in securities (debt and equity), except:
- Investments in subsidiaries (Consolidation).
- Investments in associates (Equity Method).
- Real estate investments.
- Securities measured at fair value through profit or loss (FVTPL).
⚙️ Key Principles
**Classification of Debt and Equity Securities into Three Categories:**
1. **Held-to-Maturity (HTM)**:
- Debt securities only.
- Positive intent and ability to hold until maturity.
- Measured at Amortized Cost.
2. **Available-for-Sale (AFS)**:
- Debt or equity securities.
- Not classified as Trading or HTM.
- Measured at Fair Value.
- Fair value changes recognized in OCI.
3. **Trading**:
- Debt or equity securities.
- Held for short-term sale.
- Measured at Fair Value.
- Fair value changes recognized in the income statement.
📏 Measurement
**Initial Measurement:**
- All categories measured at Fair Value + Transaction Costs.
- Exception: Transaction costs for Trading securities are expensed.
**Subsequent Measurement:**
- **HTM**: Measured at Amortized Cost using the effective interest method.
- **AFS**: Measured at Fair Value. Fair value changes recognized in OCI.
- **Trading**: Measured at Fair Value. Fair value changes recognized in the income statement.
**Impairment:**
- **HTM and AFS**: Tested for impairment. If other-than-temporary, impairment loss is recognized in the income statement.
- **Trading**: No impairment test needed because they are measured at fair value.
✅ Recognition
Investments are recognized when purchased (trade date or settlement date).
Investments are derecognized when sold or when control is lost.
Gains and losses on sale are recognized in the income statement.
For AFS, accumulated gains/losses in OCI are reclassified to the income statement upon sale.
📊 Presentation
**On the Balance Sheet:**
- **HTM**: Presented as current or non-current based on maturity date.
- **AFS**: Presented as current (if to be sold within one year) or non-current.
- **Trading**: Presented as current assets.
**On the Income Statement:**
- Trading gains and losses.
- Sale gains and losses for any category.
- Impairment losses.
**On OCI:**
- Unrealized fair value changes for AFS (until sale).
📝 Disclosure Requirements
Disclosures required:
- Accounting policies for investments.
- Classification of investments (HTM, AFS, Trading).
- Fair value of each category.
- Amortized cost for HTM.
- Unrealized and realized fair value gains and losses.
- Maturity dates for HTM and AFS debt securities.
- Any restrictions on selling or transferring investments.
🔗 Related Standards
ASC 321 (Equity Securities), ASC 326 (Credit Losses), ASC 820 (Fair Value Measurement)