Investments Flashcards
How are Available-For-Sale securities recorded on the Balance Sheet?
At Fair value as either Current or Non-current assets.
How are Available-For-Sale security Unrealized G/L treated?
Included in OCI (Other Comprehensive Income)
How are Unrealized G/L for Available-For-Sale securities that are reclassified to Held-to-Maturity or Trading Securities treated?
HTM - Stockholder’s Equity
/ Trading Securities - Current Period.
How are Held-to-Maturity securities recorded on the Balance Sheet?
Amortized cost as Current or Non-current assets.
If reclassified as AFS - Unrealized G/L go to Stockholder’s Equity
If reclassified as Trading Securities - Unrealized G/L recognized in Current Period
How are Held-to-Maturity securities Unrealized G/L treated?
Trick question - Unrealized gains or losses are not applicable because they are HTM
How are Trading Securities recorded on the Balance Sheet?
At Fair Value as a Current Asset
Unrealized gains/losses are recorded on the Income Statement
If they are reclassified as held-to-maturity or available-for-sale- there is no effect upon transfer.
How are Trading Securities Unrealized G/L treated?
Recorded on the Income Statement
If they are reclassified as HTM or AFS - there is no effect upon transfer.
Reclassification from trading category
the unrealized holding gain or loss at the date of transfer is already recognized in earnings and shall not be reversed
to trading category
shall be recognized in earnings immediately
HTM to AFS
report to OCI
AFS to HTM
Amortize into I/S any G/L that was in OCI
Impairment of security
IF the decline in FV is not temporary, the cost basis of the individual security is written down to FV as new cost basis, The write down accounted for as a realized loss and included in earnings.
sale of security any type
gain or loss goto I/S
tax effect on unrealized gains or losses
deferred income tax because unrealized gains and losses are not deductible for tax purpose
