Summary of Statement No. 12
Accounting for Certain Marketable Securities (Issued 12/75)
Summary
This Statement requires most businesses to carry marketable
equities at lower of portfolio cost or market value. A company has
two portfolio classifications for this purpose, current and
noncurrent. For the noncurrent asset portfolio, writedowns for
market-value declines (and writeups for recoveries) not yet
realized by sale are made to a separate component of equity and not
to net income. For a current portfolio, writedowns and recoveries
are included in net income. Realized gains and losses on
both current and noncurrent portfolios are included in net income.
Mutual funds, broker-dealers, insurance companies, and banks retain
their special accounting methods, with some improvements. Results
of different methods used by subsidiaries in those industries are
retained in consolidation.