Short-term Investments

Code: 1130
👁 Views: 146

Account Information

Financial Statement Statement of Financial Position
Normal Balance Debit

Definition

Financial investments held for trading or expected to be sold or recovered within the normal operating cycle or within twelve months after the reporting date, such as treasury bills, certificates of deposit, marketable securities, and other short-term investments.

Common Journal Entries

Purchase of treasury bills or certificates of deposit with maturity less than one year

Dr. Short-term Investments
Cr. Bank Account

Sale of short-term investments with a gain

Dr. Bank Account
Cr. Short-term Investments
Cr. Gain on Short-term Investments

Sale of short-term investments with a loss

Dr. Bank Account
Dr. Loss on Short-term Investments
Cr. Short-term Investments

Record increase in fair value of short-term investments at period end

Dr. Short-term Investments
Cr. Unrealized Gain - Short-term Investments

📐 IFRS vs US GAAP Accounting Treatment

IFRS IFRS 9 Financial Instruments
US GAAP ASC 320 Investments - Debt and Equity Securities

❓ Frequently Asked Questions

Q: What is the difference between short-term investments and cash equivalents?

A: Cash equivalents include investments with maturities of 3 months or less. Short-term investments have maturities exceeding 3 months but not exceeding one year.

Q: What are types of short-term investments?

A: Include: Treasury Bills, Certificates of Deposit, Commercial Paper, Money Market Funds, and time deposits with maturities exceeding 3 months but not exceeding one year.

Q: How are short-term investments measured?

A: Classified by business model: (1) Amortized Cost, (2) Fair Value through Other Comprehensive Income (FVOCI), (3) Fair Value through Profit or Loss (FVTPL).

Q: When is an investment classified as current vs non-current?

A: If intended to be sold within one year or part of a trading portfolio, classified as current. If intended to be held for more than one year, classified as non-current.