Stock market cycles Essay Example

with general accounting principles, all debts are considered liabilities and are debited on the balance sheet.

Regarding the accruing balance, it represents a debt owed by the buyer to the Iroquois Corporation and therefore constitutes a liability. Additionally, this balance can be viewed as treasury stock subscribed, as the shares purchased are used to pay the remaining equipment balance installments of $25,000 annually. Furthermore, the balance contributes to the amount of operating stock that the company is currently trading with. In Case 3 A (i), a company's decision to hold securities in various portfolios depends on their intended use.

Hold-to-maturity securities are investments that a company intends to keep until their maturity date. They are valued through amortization and serve as long-term protection for the company's interests.

The classification of held-to-maturity applies only to bonds with a specific maturity period. Equity securities lack a definite maturity date, making them ineligible for held-to-maturity classification. While temporary fluctuations in their fair value are not reflected in financial statements, they serve as long-term security for the company (Alborn, 1998, p. 57, par 4). Securities that do not meet the criteria for held-to-maturity or trading securities are classified as available for sale.

Companies purchase these securities with the aim of obtaining capital, and they do not classify them as either held-to-maturity or trading securities. They typically report these securities at their fair value in their account statements. However, any sudden fluctuations in the fair value of these securities over time should not be considered as equity.

(Alborn, 1998, p. 48, par. 2) Trading securities, which include both equity and debt, are purchased by the company with the specific intention of reselling them in

the near future. These securities are held for the sole purpose of trading by the company.

These accounts are meant for the company to generate additional capital in case of development or acquisition needs. They primarily serve to fulfill seasonal operational requirements. Additionally, their net income affects the overall change in fair value of securities markets. (ii) Benefits from these accounts accrue at different times and their fair value impact should also be taken into account.

Separate accounts in financial statements are necessary due to the varying impacts of fair value. This is because the valuations of debt securities or equity can lead to differing classifications in portfolios. Various reporting styles are needed for different investment portfolios, and they perceive different timings for their reports. Held-to-maturity statements are typically done annually, while trading securities may be reported either quarterly or half-yearly. Available-for-sale reports may be reported more frequently, such as on a monthly basis.

Reporting requires separate accounts to indicate the potential impact on the company's capital accounts. (Board, 2002, p.85, par. 4) This is because differences in the fair value of markets could necessitate different reporting methods.

It is necessary to use separate accounts to properly reflect the impact of investments that are not reported at fair value. The majority classification of security investments depends on two factors: 1) their portfolio impact on the company's capital statement, which may include long-term, short-term, or abrupt trading purposes and 2) the effect of market fair value on the security. Depending on the importance of the investments, a company can choose which portfolio to invest in.

Various securities are impacted in distinct ways by their market's fair value, leading to their classification

differences (Michie, 1999, p.79, par.3). Additionally, the balance sheets of diverse investment portfolios demonstrate the handling of unrealized losses.

When dealing with securities, the losses that result from these investments only become evident as debit balances in the balance sheets. This is because securities involve discounting using a market interest rate factor. Unrealized losses for held-to-maturity investments are calculated by comparing the expected net income to the actual results in the final balance sheet upon maturity. Any difference between these amounts results in losses, which are recorded as debit balances. For available-for-sale investments, losses are also recorded as debit balances at the end of the accounting period, which is typically based on the accounting period.

After the end of an accounting period, losses from accruals are reflected on the statements of trading securities as a debt balance. This is discussed in references such as Bolten's "Stock Market Cycles: A Practical Explanation" (2000) and Burk's "Values in the Market Places" (1992).

Two books on stock markets and securities law: "The American Stock Market under Federal Securities Law" by Aldine De Gruyter and "Conceiving Companies: Joint-Stock Politics in Victorian England" by T. Alborn published by Routledge in London in 1998.

Two books have been published on the topic of financial market regulation and the history of the London Stock Exchange. Board's (2002) Transparency and Fragmentation examines the regulation of financial markets in a constantly changing environment, while Michie's (1999) The London Stock Exchange provides a historical account of the exchange.

Oxford University Press is located in Oxford.