Investment instrument scope

An investment account can contain assets that follow different accounting rules. Begin with the rights in the instrument. A bond gives its holder a creditor claim. Common shares give an ownership interest. An ownership interest may also give the investor significant influence over the investee. The account name alone does not answer any of those questions.

Route the instrument

Create one routing record for each holding. Record the legal instrument, its contractual rights, the reporting entity, and any ownership or governance facts. Then test scope. ASC 320-10-15 sets the scope for debt securities. ASC 321-10-15 sets the scope for equity securities. ASC 323-10-15-3 addresses common stock and in-substance common stock within the equity-method Topic. Also check for consolidation and other scope exceptions before selecting a measurement schedule.

For example, a portfolio may contain a corporate bond, listed shares, and a 30-percent common-stock interest with a board seat. The bond may enter Topic 320. The listed shares may enter Topic 321. The third holding needs a documented influence analysis before an equity-method conclusion.

Keep judgments separate from arithmetic

A schedule can apply a supplied classification, fair value, or influence conclusion. It cannot prove that the conclusion is correct. Keep the source, date, preparer, reviewer, and unresolved facts with the routing record. This prevents a later calculation from hiding an unsupported scope decision.