When a company issues bonds, it is CFF. When the company buys other companies’ bonds, it is CFI. When the company issues bonds, they appear in the liabilities section as bonds or long-term debt. Where do the bonds the company has bought appear in the balance sheet? Under what name do they appear? Do they appear like long-term investments in the assets section? Thanks.
minocfa Wrote: ------------------------------------------------------- > When a company issues bonds, it is CFF. When the > company buys other companies’ bonds, it is CFI. > > When the company issues bonds, they appear in the > liabilities section as bonds or long-term debt. > > Where do the bonds the company has bought appear > in the balance sheet? Under what name do they > appear? Do they appear like long-term investments > in the assets section? > > Thanks. It depends. GAAP requires that investments in securities be classified into one of the following three categories on the balance sheet: * Trading * Available for sale * Held to maturity (bonds only) If bonds are classified as trading securities then cash flow relating to the purchase and sale shows up in CFO. Also if classified as held to maturity, no gains or losses are recognized until sold or permanently impaired (loss only.)
Do all of these securities appear in assets?
Yes, no matter what the securities are labeled as (AFS, HTM, Trading) they are all under assets. Some could be under current assets or some under long-term depending upon the maturity and what you intend to do with them. For example if you hold some T-bills or money market funds instead of cash, they will probably fall under Marketable Securities in Current Assets…if you hold some 20-year Treasury Bonds and plan on holding till maturity they probably fall in long-term assets…hope this helps.
BlueCollarHero Wrote: ------------------------------------------------------- > Yes, no matter what the securities are labeled as > (AFS, HTM, Trading) they are all under assets. > Some could be under current assets or some under > long-term depending upon the maturity and what you > intend to do with them. > > For example if you hold some T-bills or money > market funds instead of cash, they will probably > fall under Marketable Securities in Current > Assets…if you hold some 20-year Treasury Bonds > and plan on holding till maturity they probably > fall in long-term assets…hope this helps. BlueCollarHero is correct, although short-term, highly liquid investments that can be easily converted to cash and mature in <90 days, like t-bills, money market funds, and some CP would be classified as Cash & Cash Equivalents on the Balance Sheet and Stmt. of CFs. Stock and bonds of other companies that do not plan on holding long-term are generally classified as Marketable Securities.
Thank you very much for your answers. In a CFI question, I will look for the changes in these securities in the assets section then…