Summary of Statement No. 12

Accounting for Certain Marketable Securities (Issued 12/75)


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.