The March 6, 2002, edition of the Wall Street Journal includes an article by Susan Pulliam and Carrick Mollenkamp titled “Investors Turn Attention to Bank One for Its Accounting of Securitizations.”

instructions Read the article and answer the following questions.

(a) Explain the questions that analysts are raising about Bank One’s accounting for credit-card securitizations.

Why does the accounting for these securities matter?

(b) Bank One treats these securities as “available-for-sale.” What are the criteria for classifying securities as available-for-sale? Based on the information in the article, do you think Bank One is classifying these securities properly? Justify your answer.

(c) How should an investment in available-for-sale securities be reported in the balance sheet? How are unrealized gains and losses on these securities reported?

(d) What is materiality, and how does it affect Bank One’s financial statements? Would you consider $900 million immaterial for Bank One? Why or why not?