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    Classification of investmetns in financial statements

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    1. How do the various classifications of investments impact financial statements? What is the rationale behind the different accounting methods for the various investment classifications? Which is more important when determining the accounting method for securities, influence or ownership? Why?

    2. Why do companies make investments in other companies? What are the difference between debt and equity investments? What would influence a company to choose equity or debt as an investment?

    3. Read an article related to one of the questions above. How does the article relate to one of the topics above? What are your thoughts?

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    https://brainmass.com/business/financial-statements/classification-of-investmetns-in-financial-statements-debt-and-equity-investments-262472

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    Question 1
    The classifications of investments dictate how the transactions for the investments be accounted for in the company's accounting books, and hence how these investments be presented in the financial statements. For example, held-to-maturity investments are included in the noncurrent assets in the financial statements.

    The rationale behind these classifications is that companies have different intentions as regard investments. For example, some investments are planned to be sold as soon as possible while others are planned to be held until maturity. Furthermore, ...

    Solution Summary

    The solution examines the classification of investments in financial statements. How various classifications of investments impact financial statements is determined.

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