in one of the questions on calculating CFI Schweser have included - “Sold held-to-maturity securities with a book value of $1.8 for $2.1” in CFI. So in the calc they have included + $2.1M. The ammount is fine but why is this included in CFI? I thought CFI was purely PPE? Should this not be in CFF?
securities held to maturity are investments too.
yes, it is a part of CFI it’s also worth noting that you will have to subtract this $0.3 gain from CFO when using the indirect method because it was added to net income in the income statement
Sounds pretty obvious when you put it like that. I’ve just had it drilled into me CFI is PPE. Anyway thanks.
Accounting is different for held-to-maturity and available-for-sale (considered investments, for long-term return) compared to trading securities (considered current assets). If I find the post where i described what goes where and who is reflected at what value, I’ll post it.
investments can be PPE and can also be purchasing stock in another firm or purchasing fixed income security from another firm. in this case the firm Sold a “held-to-maturity securities” security that it had invested in another firm. if the firm issues securities it is CFF but if it purchases such a security in another firm it is CFI. same treatment as it would be if it bought 20% stock in a Joint venture