Actg Case #3

In: Business and Management

Submitted By kbush9
Words 374
Pages 2
Question 1
Jim Beatty’s claim that no impairment is needed because the overall investment portfolio of public equity securities is in an unrealized gain position is invalid. According to ASC 320-10-35-20, in determining whether an investment is impaired, impairment should be assessed at the individual security level. Instead of assessing the impairment of the portfolio as a whole, Jim Beatty needs to check for impairment of individual securities. However, this also means that the company can evaluate the aggregate investment in Wells Fargo altogether, rather than just the stock that is in a loss position.

Question 2
In determining whether these investments are other-than-temporarily impaired, the company should consider the following (SAB 111):
• The amount of the loss and the length of time that the investment has been in a loss position.
• The financial condition and near-term prospects of the issuer, including any changes or events that could affect the operations of the issuer.
• The investor’s intent and ability to hold an investment until fair value recovers.

Question 3
Kraft Foods and Sanofi-Aventis: The company should record other-than-temporary impairments for Kraft Foods and Sanofi-Aventis because these investments have had a fair value below cost for 24 and 30 months and the amount of the losses are large. The gross loss for Sanofi-Aventis increased during 2013. Although the gross loss for Kraft Foods decreased during 2013, it remains in a loss position and should be considered impaired.
U.S. Bancorp and Swiss Re: The company should record other-than-temporary impairments for U.S. Bancorp and Swiss Re because the gross loss for each investment is large and these investments have been in a loss position for 21 and 27 months. Although there has been an increase in the per share market price of common stock for these companies, the fair…...

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