Evaluating Marketable Securities

Evaluating Marketable Securities

We have investments in marketable securities which are considered “available-for-sale” under the provisions of the accounting standard for certain debt and equity securities. Marketable securities are included in the accompanying consolidated balance sheets in Short-term investments, Investments in unconsolidated businesses or Other assets. We continually evaluate our investments in marketable securities for impairment due to declines in market value considered to be other-than-temporary. That evaluation includes, in addition to persistent, declining stock prices, general economic and company-specific evaluations. In the event of a determination that a decline in market value is other-than-temporary, a charge to earnings is recorded for the loss, and a new cost basis in the investment is established. Trading securities (HFT) are investments in equity instruments, such as stocks, options, rights warrants or debt instruments, such as bonds, which the investor has acquired in an attempt to make profits by buying and selling within a short period of time. These are normally classified as current assets. Available-for-sale (AFS/AVS) securities are all investments in marketable equity or debt instruments that do not fit the definitions of HTM or trading securities. These may be classified as current or noncurrent assets, depending on the expected date of sale. If the holding period of the securities is indefinite, they should be classified as noncurrent assets. Held-to-maturity (HTM) securities are investments in bonds and other debt instruments which the investor has the ability and intent to hold until the due date for repayment. These are classified as noncurrent assets (unless the maturity date is less than one year from the balance sheet date). As a result, there are two different categories for equity securities (these cannot be HTM securities), and three categories for debt securities. They are categorized based on management’s intentions. Trading Securities (HFT) When trading securities are acquired, they are recorded at cost. Since they are being purchased for the purpose of generating profits from resale, they are a form of inventory, and transactions are normally reported in the operating activities section of the statement of cash flows. Due to the marketable nature of these securities, and the intention to sell them in the near future, fluctuations in market price are taken into account in reported net income each period, even for securities that have not been sold during the period. The carrying values of the securities are adjusted to market price on a continuous basis

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