Discussion Questions: Intermediate Accounting
Please answer each question individually in at least 200 words per question.
1. What are the differences between traditional and derivative instruments? Why do companies use derivative instruments? Are derivatives a good investment? Explain why or why not.
2. Why do companies make investments in other companies? What are the differences between debt and equity investments? What would influence a company to choose equity or debt as an investment?
3. How do the various classifications of investments affect financial statements? What is the rationale behind the different accounting methods for the various investment classifications? Which is more important when determining the accounting method for securities, influence, or ownership? Explain why.