Let's maximize profits through FASB statement NO. 115
Fasb statement no. 115 is another example of the boards emphasis on the balance sheet as contrasted with the income statement . As treasurer of diamond instrument , you desire to maximize income over the short run . Diamond has had excess cash , and you have chosen to invest it in both marketable debt and equity securities. What classification policy could you follow to maximize your investments impact on net income? How would you justify this policy to your auditors?
This Statement addresses the accounting and reporting for investments in equity securities that have readily determinable fair values and for all investments in debt securities. Those investments are to be classified in three categories and accounted for as follows:
* Held to Maturity: Debt securities the enterprise has the positive intent and ability to hold to maturity are classified as "Held to Maturity" securities and reported at amortized cost
* Trading: Debt and equity securities that are purchased and held principally for the purpose of selling in the near term ...
This explains the FASB statement no. 115 and its impact on accounting and reporting on investment in securities