Union Planters is a Tennessee bank holding company (that is, a corporation that
ID: 2415352 • Letter: U
Question
Union Planters is a Tennessee bank holding company (that is, a corporation that owns banks). (Union Planters is now part of Regions Bank.) Union Planters manages $32 billion in assets, the largest of which is its loan portfolio of $19 billion. In addition to its loan portfolio, however, like other banks it has significant debt investments. The nature of these investments varies from short-term in nature to long-term in nature. As a consequence, consistent with the requirements of accounting rules, Union Planters reports its investments in two different categories—trading and available-for-sale. The following facts were found in a recent Union Planters’ annual report.
Gross Gross
Amortized Unrealized Unrealized Fair
(All dollars in millions) Cost Gains Losses Value
Trading account assets $275 -- -- $275
Securities available for sale 8,209 $108 $15 8,302
Net income 224
Net securities gains (losses) (9)
How must Union Planters account for its investments in each of the two categories?
Explanation / Answer
Union Planters (All amounts in $ millions) Investments in Trading Account Assets At cost or fair value, whichever is lower 275 Less : Losses or Gains on Sale of Securities -9 Net Book Value of Trading Account Assets 266 Securities available for Sale Fair Value (including unrealised gains and losses) 8302 Add : Income on Securities 224 Net Book Value of Securities available for sale 8526
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