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- 2011-7-11
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Reclassification from HFT to AFS
Fiduciary Investors held two portfolios of marketable equity securities:
$50 million in Portfolio A was accounted for as available-for-sale.
$50 million in Portfolio B was accounted for as trading securities.
Assume that Fiduciary reclassified securities ($10 million carrying value, $8 million market value) from Portfolio B into Portfolio A under U.S. GAAP. If no previous write downs were made, Fiduciary must:
A) charge $2 million to its income statement.
B) charge $2 million to the equity section of its balance sheet.
C) do nothing to its income statement or equity section of its balance sheet.
Your answer: C was incorrect. The correct answer was A) charge $2 million to its income statement.
U.S. GAAP allows investment managers some latitude in reclassifying investment assets from “trading” to “available-for-sale.” Unrealized gains and losses are recognized on the income statement. IFRS severely restricts reclassification out of the held-for-trading category.
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I don't understand this...if the securities were held for trading, then they would already be carried on the balance sheet at fair value (8mn) an the loss would have gone through the income statement. I would have thought that no adjustment at all is needed to the IS or the BS. |
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发表于 2011-7-13 04:30
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