美國CPA模擬試題：有價證券（三）

Beach Co. determined that the decline in the fair value (FV) of an investment was below the amortized cost and other than temporary. The investment was classified as available-for-sale on Beach's books. The controller would properly record the decrease in FV under U.S. GAAP by including it in which of the following?

a. Other comprehensive income section of the income statement, and writing down the cost basis to FV.

b. Extraordinary items section of the income statement, net of tax, and writing down the cost basis to FV.

c. Other comprehensive income section of the income statement only.

d. Earnings section of the income statement and writing down the cost basis to FV.

Explanation

Choice "d" is correct. When an available-for-sale security is determined to be impaired because of an other than temporary decline in fair value below cost, the asset must be written down to the lower fair value by recording a loss that is recognized on the income statement.

Choice "c" is incorrect. The impairment of an available-for-sale security must be recorded on the income statement. Only gains and temporary losses on available-for-sale securities are reported in other comprehensive income.

Choice "b" is incorrect. The impairment of an available-for-sale security is reported as a component of income from continuing operations and is not considered an extraordinary item.

Choice "a" is incorrect. The impairment of an available-for-sale security must be recorded on the income statement. Only gains and temporary losses on available-for-sale securities are reported in other comprehensive income.

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