ctcLink Accounting Manual | 40.30.20.4 Long-Term/Non-Current Investments

40.30.20.4 Long-Term/Non-Current Investments

Long-term or non-current Investments are investments with a maturity date of one year or greater or which the college does not intend to sell.  The intent is to profit from the interest and dividend payments that these investments pay out from time to time.

Examples include real estate held as an investment, participating interest-earning investment contracts, and investments in non-participating interest-earning investments (non-negotiable certificates of deposit, guaranteed investment contracts with redemption terms that do not consider market rates).

 

Account Number Name Description
1110010 Non-LGIP Invest 365+ Days Long-term investments are investments which the college does not intend to sell or have a maturity date of more than one (1) year.  The intent is to profit from the interest and dividend payments that these investments pay out from time to time.

Illustrative Entry

Non-LGIP Invest 365+ Days

Fund Class Dept Method Acct DR Acct CR Amount ($)
790 285 ddddd AP Voucher 1110010 1000070 100,000.00

Occasionally premiums and discounts are paid at the date of purchase. When this occurs, the unamortized portion is held in Fund 790 using account 1020020 for premiums and account 1020030 for discounts. With each interest payment a portion of the discount or premium will be amortized. Amortization of a discount increases the accrued interest earned and conversely, amortization of a premium decreases the accrued interest earned each period.

Illustrative Entries

Long-Term Investment with a Premium

Fund Class Dept Method Acct DR Acct CR Amount ($)
790 285 ddddd AP Voucher 1110010 1000070 100,000.00
790 285 ddddd AP Voucher 1020020 1000070 10,000.00

Long-Term Investment with a Discount

Fund Class Dept Method Acct DR Acct CR Amount ($)
790 285 ddddd AP Voucher 1110010 1000070 100,000.00
790 285 ddddd AR Direct Journal 1000070 1020030 10,000.00

Investments in bonds are often made between interest dates. In such cases the purchaser pays for the previous interest earned (accrued interest) on the bonds since the last interest receipt. Accrued interest paid at the acquisition date should be booked as a debit to interest receivable.

Illustrative Entries

Long-Term Investment Accrued Interest Paid at Time of Purchase

Fund Class Dept Method Acct DR Acct CR Amount ($)
790 285 ddddd AP Voucher 1110010 1000070 100,000.00
790 285 ddddd AP Voucher 1010030 1000070 5,000.00

Long-Term Investment Interest Paid on Interest Date

On the first payment date the accrued interest paid at the time of purchase will be booked as a debit to cash in bank and a credit to interest receivable. The balance will be booked as a debit to cash in bank and a credit to interest revenue.

Fund Class Dept Method Acct DR Acct CR Amount ($)
790 285 ddddd AR Direct Journal 1000070 4120010 7,000.00
790 285 ddddd AR Direct Journal 1000070 1010030 5,000.00

At the end of each fiscal year, investments that have maturity date less than one (1) year in the future, or if the college anticipates selling the investments, should be moved from long-term investment accounts to short-term investments.  This will ensure correct reporting on the financial statements as required by GASB.

Illustrative Entry

Long-Term to Short-Term Adjustment

Fund Class Dept Method Acct DR Acct CR Amount ($)
790 285 ddddd Journal Entry 1020010 1110010 100,000.00

At the end of each fiscal year, investment balances are compared to fair market value. If a material difference (greater than 1% of the value of the portfolio) occurs, an entry for the difference is to be recorded using account 1110020 (Valuation Allowance - Investments) and account 4120050 (Gain/Loss on Investment - Non-Cash).

Illustrative Entries

For funds maintaining non-pooled investments (e.g., Student body is collecting funds for a future building project invested separately), the entries will be recorded within that fund using the same mechanics as below.

Fair Market Value Increase

Fund Class Dept Method Acct DR Acct CR Amount ($)
790 285 ddddd Journal Entry 1110020 4120050 7,500.00

Fair Market Value Decrease

Fund Class Dept Method Acct DR Acct CR Amount ($)
790 285 ddddd Journal Entry 4120050 1110020 7,500.00

 

40.30.20.3 Cash Equivalent/Short-Term Investments <<  40.30.20.4 >>  40.30.20.5 Investment Interest Distribution