Investment Classification, Measurement, and Disclosure

This chapter covers accounting for investments, where classification frequently drives the correct measurement and presentation. The key is to identify the investment type correctly and then apply the related valuation, income-recognition, and disclosure rules.

In This Chapter

• Classifying Debt and Equity Investments Under U.S. GAAP covers the major investment buckets and the current U.S. GAAP split between debt and equity instruments.
• Equity Investments and the Equity Method explains influence-based accounting.
• Credit Losses and Impairment for Investment Securities addresses declines in value and expected credit losses.
• Investment Disclosure Requirements covers supporting note information.

How to Use This Chapter

• Read this chapter after PP&E if you want to separate operating assets from investment assets clearly.
• Focus on how classification changes income effects and balance-sheet measurement.
• Return here whenever a FAR miss turns on investment category, equity-method logic, or CECL treatment.

In this section

• Classifying Debt and Equity Investments Under U.S. GAAP
  Understand how FAR distinguishes debt securities from equity investments, including HTM, AFS debt, fair value categories, and the ASC 321 model for most equity holdings.
• Equity Investments and the Equity Method
  Explore fair value through net income vs. equity method, significant influence thresholds, and best practices in accounting for equity investments.
• Credit Losses and Impairment for Investment Securities
  Explore the comprehensive approaches under ASC 326 for debt securities and impairment considerations for equity securities, including credit loss models, IFRS comparisons, best practices, and illustrative examples.
• Investment Disclosure Requirements
  Explore fair value hierarchy, realized vs. unrealized gains, concentration risks, and reclassification adjustments for investment disclosures under GAAP, including illustrative footnotes and best practices.