1262
Investment Property - Land
ASC 321: Investments - Equity Securities
📖 Overview
This standard addresses accounting treatment for investments in equity securities that do not result in consolidation or application of the equity method. These investments are measured at fair value through net income.
🎯 Scope
This standard applies to investments in equity securities (common stock, preferred stock) that do not result in:
- Consolidation of subsidiaries.
- Application of the Equity Method for associates.
Note: This standard replaced ASC 320 requirements for equity securities.
⚙️ Key Principles
1. **Fair Value Measurement**:
- Equity investments are measured at fair value.
- Fair value changes are recognized in the income statement.
2. **Fair Value Option Exception**:
- Equity securities without observable market prices.
- May be measured at cost minus impairment (if no updated fair value information).
3. **Impairment**:
- For securities measured at cost: Tested for impairment when indicators exist.
- Impairment loss is measured as the difference between carrying amount and fair value (if determinable).
✅ Recognition
Investment is recognized when purchased.
Fair value changes are recognized in the income statement in the period they occur.
Dividends received are recognized as revenue when declared (dividend declaration date).
Investment is derecognized when sold.
📏 Measurement
**Initial Measurement:**
- Measured at fair value.
- Transaction costs are added (unless the instrument is FVTPL).
**Subsequent Measurement:**
- **General Rule**: Fair value, with fair value changes recognized in the income statement.
- **Exception (No Observable Market Price)**: May be measured at cost minus impairment.
**Impairment:**
- For securities measured at cost.
- Impairment loss is recognized in the income statement.
- Impairment loss cannot be reversed.
📊 Presentation
**On the Balance Sheet:**
- Equity investments appear within current assets (if trading) or non-current assets.
**On the Income Statement:**
- Fair value gains and losses.
- Dividend income.
- Impairment losses.
**Note Disclosures:**
- Accounting policies.
- Measurement basis (fair value or cost).
- Realized and unrealized fair value gains and losses.
📝 Disclosure Requirements
Disclosures required:
- Accounting policies for equity investments.
- Measurement basis (fair value or cost).
- Fair value of equity investments.
- Realized and unrealized fair value gains and losses.
- Dividend income.
- Any restrictions on selling shares.
- For cost-method investments: Reasons for not using fair value, and any impairment losses.
🔗 Related Standards
ASC 323 (Equity Method), ASC 820 (Fair Value Measurement), ASC 326 (Credit Losses)
📁 Related Accounts in the Chart of Accounts
Explore accounts commonly associated with this accounting standard.