Should the investment securities that companies own be lef
Question and Solution
Should the investment securities that companies own be left on the books at historical cost, or should they be adjusted annually to their current market price (as is now required by GAAP)? When physical assets are purchased, they are recorded on the balance sheet at cost and left there until the asset is sold. For example, when land is purchased, the cost of the land is recorded on the books. If the land increases in value, no adjustment is made. The company realizes the gain in value when it sells the land at a gain. Why don’t we do this for investment securities? Why should the assets for land and securities be handled differently?