M1 Financial Instruments

Question 1

Two instrument available to be reported at fair value option:

Answer 1

1. AFS, would go into earnings rather than OCI 2. Investment that would be otherwise be recorded with equity method

Question 2

Disclosures

Answer 2

Fair value, concentrations in credit risk (borrower defaulting), market risk (not required, only encouraged),

Question 3

Trading securities

Answer 3

If current asset (like a trader) then CFO. All gains and losses go on the income statement unrealized or realized. Can also be non current asset, then would be CFI

Question 4

AFS (Available for Sale)

Answer 4

CFI usually non-current. Mark it to fair value. If realized g/l goes on I/S. If unrealized goes on OCI.

Question 5

HTM (DEBT)

Answer 5

Usually a bond. If you want, can classify as HTM. On CFI. Only HTM if has INTENT and ABILITY to hold this investment until Maturity.