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i.e
X company invested in1000 bonds (Mature at1 -1 -2020) to be held to trading- with an amount of980,000 USD, face value1000 USD per bond, and with market value at the date of purchase980 USD and that on25 -1 -2015
at17 -3 -2015 the market value was950 USD and the Management decided to reclassification and convert the bonds from trading to be held to maturity.
No coupons distributed yet.
What is the accounting treatment required for the conversion the "Bonds held to trading" to "be Bonds held to maturity" ??
Transfers between investment groupsConversion to the bond group acquired to maturity of group investments available for saleThe report gains or unrealized losses in a separate account in equity are required to have the entity invested firm intention and ability to hold to maturity. This is the kind of investment measure in stock on the basis of the adjusted cost by depletion of the premium, or discount deals with interest income and depletion of premium or discount in the income statement.
Write down the asset to it's fair value on17/03/2015 and the unrealized loss of $30 per bond (980-950) will be recognized in the financial statement and $950 per bond will become the carrying amount of the asset reclassified as held to maturity. As for the initial discount of $20 per bond, we'll have to amortize it over the life of the bond i.e.5 years in this case.
