DOES AN INVESTMENT SHOW UP IN A PROFIT AND LOSS STATEMENT?

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ajherden July 18, 2010 at 4:58 pm

Typically, no. You don’t incur a cost for an investment, as it is expected to have future economic benefit. The cost of the investment would show up on the balance sheet either as historical cost (if you intend to hold it for more than a year), or at fair value (if you are holding to sell). Fluctuations in the fair value of held-for-sale securities come in the comprehensive income portion of the equity section, so they never hit your PnL.

Investment income, however, does flow through your PnL. If it is not attributable to the operations of your business, it will be at the bottom of your PnL (usually stated net of tax) above net income. Gains and losses on investments when realized will flow through your PnL as well.

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