SFAS No. 115: new accounting rules for investments in debt and equity securities. (Statement of Financial Accounting Standards)

Ohio CPA Journal, The, February, 1994 by Clark, Myrtle W.; Li, June F.

SFAS No. 115 supersedes SFAS No. 12 and amends SFAS No. 65. No. 115 provides a situational approach for investments in debt and equity that have readily-determinable fair values which is based on managerial intent regarding investments in financial instruments. (Reprinted by permission of the publisher.)

Financial instruments are risky investments.(1) Examples of financial instruments include securitized and unsecuritized loans, financial option contracts and equity securities such as common stock and partnership interests. Their net realizable values fluctuate in response to the risk characteristics o debtors, the expected cash flows of business entities and changes in the economic environment. There are four components of risk associated with investments in debt and...

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