Question
Interpreting Disclosures of Investment Securities Amgen Inc. reports the following disclosure relating to its accumulated other comprehensive income. Foreign Cash Available- Currency Flow for-Sale $
Interpreting Disclosures of Investment Securities Amgen Inc. reports the following disclosure relating to its accumulated other comprehensive income.
| Foreign | Cash | Available- | |||
|---|---|---|---|---|---|
| Currency | Flow | for-Sale | |||
| $ millions | Translation | Hedges | Securities | Other | AOCI |
| Balance as of December 31, 2017 | $(635) | $(7) | $(173) | $ - | $(815) |
| Cumulative effect of change in accounting | |||||
| principle, net of tax | (11) | (11) | |||
| Foreign currency translation adjustments | (169) | (169) | |||
| Unrealized (losses) gains | 73 | (667) | (594) | ||
| Reclassification adjustments to income | 314 | 438 | 752 | ||
| Other | (2) | (2) | |||
| Income taxes | - | (91) | 7 | - | (84) |
| Balance as of December 31, 2018 | $(804) | $289 | $(406) | $(2) | $(923) |
a. Amgen reports unrealized gains and losses on available-for-sale securities as part of AOCI. Which of the following types of investments could be included in this account? Select all that apply.
| Investments with Unrealized Gains (Losses) in AOCI | |
|---|---|
| i. Bonds issued by US corporations. | AnswerYesNo |
| ii. Common stock traded on US stock exchange. | AnswerYesNo |
| iii. Common stock traded on foreign stock exchange. | AnswerYesNo |
| iv. Debt securities issued by a foreign government. | AnswerYesNo |
| v. Municipal bonds. | AnswerYesNo |
| vi. U.S. Treasury bills. | AnswerYesNo |
b. Consider the securities held in the available-for-sale portfolio at December 31, 2018. Identify each of the following statements as true or false.
AnswerTrueFalse i. At December 31, 2018, the fair value of the securities was $406 million less than their amortized cost. AnswerTrueFalse ii. At December 31, 2018, the fair value of the securities was $406 million greater than their amortized cost. AnswerTrueFalse iii. At December 31, 2018, the fair value of the securities was $406 million lower than their value at December 31, 2017. AnswerTrueFalse iv. At December 31, 2018, the fair value of the securities was $233 million lower than their value at December 31, 2017.
c. Consider the securities held in the available-for-sale portfolio at December 31, 2018. Identify each of the following statements as true or false in describing the change in the market value of those securities during the year. AnswerTrueFalse i. Decreased by $406 million. AnswerTrueFalse ii. Decreased by $667 million. AnswerTrueFalse iii. Increased by $667 million. AnswerTrueFalse iv. Decreased by $229 million. d. Amgen increased AOCI by $438 million for reclassification adjustments to income. Identify each of the following statements as true or false in describing what this line item means. AnswerTrueFalse i. During 2018, Amgen sold available-for-sale securities and realized a loss of $438 million. AnswerTrueFalse ii. During 2018, Amgen sold available-for-sale securities and realized a gain of $438 million. AnswerTrueFalse iii. During 2018, Amgen sold available-for-sale securities that had unrealized gains of $438 million at December 31, 2017. AnswerTrueFalse iv. During 2018, Amgen sold available-for-sale securities that had unrealized losses of $438 million at December 31, 2017.
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