STATEMENTS OF FINANCIAL ACCOUNTING

STATEMENTS OF FINANCIAL ACCOUNTING

STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS NUMBERS 124 & 125: AN ASSESSMENT

This research reviews and assesses two statements of financial accounting. The statements, issued by the Financial Accounting Standards Board, are numbers 124 and 125.

Statement of Financial Accounting Number 124

Statement of Financial Accounting (SFAS) Number 124 was issued in November 1995 (Financial Accounting Standards Board, 1995). The statement deals with the accounting for some investments held by non-for-profit organizations.

Specifically, SFAS No. 124 ôestablishes standards of financial accounting and reporting of certain investments in securities and establishes disclosure requirements for investments held by non-for-profit organizationsö (Financial Accounting Standards Board, 1995, p. 1). SFAS No. 124, thus, is a companion of sorts for SFAS No. 115 which provides similar guidance for such investments held by for-profit organizations.

The standards promulgated in SFAS No. 124 apply to ôinvestments in securities that have readily determinable fair values à and to all investments in debt securitiesö (Financial Accounting Standards Board, 1995, p. 1). SFAS No. 124 holds that the fair value of an equity security is ôreadily determinable if any one of the following criteria is metö (Financial Accounting Standards Board, 1995, p. 1):

1. Sales prices or bid-and-asked quotations for the security, if traded in the United States, are available from a securities exchange by the Securities and Exchange Commission (SEC) or prices in the over-the-counter market that are reported publicly by either the National Association of Securities Dealers Automated Quotations (NASDAQ) or the National Quotation Bureau.

2. The requirements stated above are applicable to foreign securities not trade in the United States if the ôforeign market is of a breadth and scope comparable to one of the U.S. marketsö listed above (Financial Accounting S…

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