Both Intel (www.intel.com (Links to an external site.)Links to an external site.
ID: 2583975 • Letter: B
Question
Both Intel (www.intel.com (Links to an external site.)Links to an external site.) and Microsoft (www.microsoft.com (Links to an external site.)Links to an external site.) have large amounts of investment securities. Visit their home pages, and review their financial statements for information on how they account for investment securities and the amounts of those securities. Describe your findings in a short memo.
This will be worth five points. Points will be deducted for poor grammar and misspelled words.
Explanation / Answer
The balance sheet of Intel (as on Dec 31, 2016) indicates the following investments made by the company
Short term investment is valued at $3225 million
Assets held for sale is valued at $4716 million
Other Long term investment is valued at $7159 million
The following are the ways by which the investments are accounted for
1. All short term investments and asset for sale (AFS) are short term investment instruments which are acquired with the objective of selling within 12 months of purchase. Such investments are valued at fair market value. The profit or loss in revaluation of these investments are recognised in other income of income statement.
2. Long term investments with available market price: All long term investments whose value is available are also valaued at market price and any mark to market profits and losses are routed through income statement.
3. There are certain strtegic investment in equity shares of certain corporations whose value cannot be ascertained as they are not publicly traded or for some other practical purposes. In such cases, the company follows the cost based approach and recognises such investments at costs.
The balance sheet of Microsoft (as on June 30, 2017) indicates the following investments made by the company
Short term investment is valued at $125318 million
Equity & Other Investment is valued at $6023
The following are the ways by which the investments are accounted for
1. All short term investments are acquired with the objective of selling within 12 months of purchase. Such investments are valued at fair market value. The profit or loss in revaluation of these investments are recognised in other income of income statement.
3. There are certain strtegic investment in equity shares which are long-term in nature whose value cannot be ascertained as they are not publicly traded or for some other practical purposes. In such cases, the company follows the cost based approach and recognises such investments at costs.
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