Connection: Securities & Investment Vehicles (ADMN 201) ↔ Investment Accounting (ACC 926)
The Link
ADMN 201 teaches the market side of investments: what stocks and bonds are, how primary and secondary markets work, what investors look at when buying. ACC 926 teaches the investor’s accounting side: once the security is on the books, how is it measured every reporting period, where do gains and losses flow, how does this change when the holder has significant influence or control.
The two sides answer different questions. The student needs both — the market side for “should we buy this?” and the accounting side for “what does our balance sheet look like after we buy it?”
graph TD Market[ADMN 201 Markets:<br/>Stocks · Bonds · Mutual Funds<br/>Primary/Secondary markets<br/>Risk · Return] Account[ACC 926 Accounting:<br/>How investor measures the holding<br/>each period] Market -.companion to.-> Account Account --> NoI[< 20% — Passive:<br/>Cost · Amortized Cost<br/>FV-NI · FV-OCI] Account --> Sig[20-50% — Significant Influence:<br/>Equity Method] Account --> Ctrl[> 50% — Control:<br/>Consolidation]
(diagram saved)
From ADMN 201
“Securities Markets — primary (new issues) and secondary (resale). Investors evaluate stocks on EPS, P/E, market/book; bonds on yield, maturity, credit rating.” — SecuritiesMarkets
“Investment Vehicles — common stock, preferred stock, corporate bonds, government bonds, mutual funds, ETFs.” — InvestmentVehicles
ADMN 201 stops at the buy/sell decision and the markets that enable it.
From ACC 926
The moment the entity holds the security, classification decides reporting:
| % equity | Influence | Treatment |
|---|---|---|
| < 20% | None / passive | Choose: Amortized cost / FV-NI / FV-OCI (IFRS) |
| 20–50% | Significant (associate) | Equity method |
| > 50% | Control (subsidiary) | Consolidation |
For the passive case, the business model decides:
| Intent | Model | Where unrealized G/L go |
|---|---|---|
| Hold for contractual cash flows (debt, SPPI) | Amortized cost | Net Income (impairment only) |
| Hold for trading | FV-NI | Net Income |
| Hold to collect AND sell (debt) | FV-OCI debt (recyclable) | OCI; recycle on sale |
| Equity, irrevocable election (non-trading) | FV-OCI equity (non-recyclable) | OCI; never recycle |
See Investments for full treatment.
Why This Matters
ADMN 201’s view says: “We bought 100 shares of Royal Bank stock.” That’s it.
ACC 926 asks: was this for trading? For long-term hold? For strategic stake? Each answer means a different journal entry, different balance sheet line, and different income statement effect.
| ADMN 201 says | ACC 926 adds |
|---|---|
| ”We bought common stock” | Did we elect FV-OCI (irrevocable)? Or default to FV-NI? |
| ”We bought bonds” | Are we holding to maturity (amortized cost) or trading (FV-NI) or hold-and-sell (FV-OCI debt)? |
| ”We acquired 30% of XYZ Corp” | Equity method — investment carrying amount tracks our share of XYZ’s net income |
| ”We acquired 60% of ABC Inc.” | Consolidate — combine line by line, recognize non-controlling interest |
| ”Stock price went up by $1,000” | Goes to Net Income (FV-NI) OR OCI (FV-OCI) — totally different effect on EPS |
Cross-Course Implication for Ratio Analysis
ADMN 201’s FinancialRatios uses Net Income as a numerator in many ratios (ROE, EPS, profit margin). If the company holds large FV-OCI investments, big swings in their fair value don’t show up in Net Income — they’re parked in OCI and AOCI on the balance sheet. So ROE can look stable while the firm’s economic position is moving substantially. This is a known weakness of relying on net income alone.
Comprehensive Income (Net Income + OCI) gives a fuller picture, but most ratios still use Net Income.
Related Concepts
- SecuritiesMarkets
- InvestmentVehicles
- Investments
- PresentValueMeasurement — fair value hierarchy underpins all FV models
- ReportingFinancialPerformance — OCI mechanics
- SelectionBias-SecuritiesMarkets — PHIL 252 angle on investor decisions