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xavier16
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Joined: 06 Nov 2008
Online Status: Offline
Posts: 58

Posted: 30 Mar 2009 at 22:33 \| IP Logged

I know that any unrealized gain/loss in AFS are recorded in Other Comprehensive Income. Now what happens to the Unrealized gain/loss in Accum. Comprehensive income when it is transferred to Trading Security? How do you compute the gain/loss recognized in earnings for this security (the AFS security transferred to Trading security)? Do you compute it by getting the difference between the original value of the AFS and the fair value now (similar to selling an AFS security)?

taxwoman
Newbie
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Joined: 19 Nov 2008
Online Status: Offline
Posts: 40

Posted: 31 Mar 2009 at 08:31 \| IP Logged

The portion of unrealized holding gain (loss) on securities transfered from AFS to trading not previously recognized in earnings is recognized in earnings immediately.

1. Purchase AFS security.

Dr. Investment - AFS $10,000
Cr. Cash $10,000

2. At year-end record unrealized holding loss and close OCI to ACOI.

Dr. OCI - Loss on security $1,000
Cr. Investment - AFS $1,000

Dr. ACOI $1,000
Cr. OCI - Loss on security $1,000

3. In following year, reclassify AFS to trading

Dr. Investment - trading $9,000
Cr. Investment - AFS $9,000

Dr. Loss on trading security (earnings) $1,000
Cr. ACOI $1,000

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