With available-for-sale securities, unrealized holding gains and losses are:?
With available-for-sale securities, unrealized holding gains and losses are:
a. Not reported until recognized.
b. Reported on the income statement.
c. Reported as an unearned revenue on the balance sheet.
d. Reported in the stockholders' equity section of the balance sheet.
Answer is D. Gain/loss is booked to income when the security is sold. From FAS 115:
13. Unrealized holding gains and losses for trading securities shall be included in earnings. Unrealized holding gains and losses for available-for-sale securities (including those classified as current assets) shall be excluded from earnings and reported as a net amount in a separate component of shareholders' equity until realized.
a) Not reported until recognized.
Remember the following:
- Trading securities: market value with unrealized gains and losses flowing through income statement
- Held to Maturity: amortized cost (unless impaired)
- Available for Sale: market value with unrealized gains and losses recognized at the time of sale.
Dear AS: Answer "A"
See IRS Sch D instructions.
This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provided. Click on my profile to read more. Errol Quinn Enrolled Agent