Financial Instruments

Question 1

what are trading debt (equity) securities and its accounting?

Answer 1

trading debt securities are reported at fair value on BS and its realized/unrealized gains/losses are included in earnings.

Question 2

what are held to maturity securities?

Answer 2

held to maturity securities are reported at their amortized costs

Question 3

what are available for sale securities?

Answer 3

available for sale securities are reported at fair value and its unrealized gains/losses are reported under separate component of other comprehensive income until it’s realized.

Question 4

when will AFS securities result a loss in OCI?

Answer 4

AFS securities result a loss in OCI when FV below PV of expected CFs and PV below amortized cost. The loss reported in OCI is difference b/w FV and PV. The loss reported on IS is difference b/w PV and amortized cost.

Question 5

how to calculate securities?

Answer 5

using current expected credit loss model (CECL) which equals PV - amortized cost

Question 6

how to record unrealized gains/losses for trading securities and available for sale securities?

Answer 6

• Trading debt securities: included in earnings/income statement
• AFS securities: included in other comprehensive income