Problem
Target Corporation prepares its financial statements according to U.S. GAAP. Target's financial statements and disclosure notes for the year ended February 1, 2020, are available here. This material also is available under the Investor Relations link at the company's website. Target does not have investments in stock or bonds. However, CVS Health Corporation, which purchased Target's pharmacy and clinical business during 2015, does have some investments. Access CVS's 2019 10K at investors.cvshealth.com to answer the following questions.
Task
I. Regarding CVS's investments in debt securities:
i. Turn to Note 1: Significant accounting policies. What approach is CVS using to account for its investments in debt securities-are they HTM, TS, or AFS?
ii. Turn to Note 3: Investments. What is the total amount of CVS's investments as of 12/31/2019, and where are those investments shown on CVS's balance sheet?
iii. What is the total amount of CVS's debt investments that are classified as available-for-sale as of 12/31/2019, and how much of that total is amortized cost as opposed to accumulated fair value adjustment that account for unrealized gains and losses?
iv. Turn to Note 4: Fair Value. What is the amount of CVS's investments in debt securities that is categorized as Level 1, Level 2, and Level 3 of the fair value hierarchy?
II. Per Note 1, CVS has equity-method investments in SureScripts, LLC, and in Heartland Healthcare Services. CVS indicates that those investments are immaterial for the year ended December 31, 2019. Assuming that the Heartland investment is material,
i. How would Heartland's earnings affect CVS's income statement?
ii. How would Heartland's earnings affect CVS's balance sheet?