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ikoreaii

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tT
发表于 2011-7-13 15:37 | 只看该作者

Different securities

understand, accounting, available, question, equity
We know the accounting treatment for Held for trading, Held till maturity and available for sale securities. But I get confused when marketable securities or equity are given in question. Probably, I don't understand various equity types well. How do these two(Equity and MS) correlate with HFT, HTM and AFS?
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Matori

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发表于 2011-7-13 15:38 | 只看该作者
Well, technically Equity has nothing to do with all these kinds of securities...

Equity is simply Asset less Liablities, which is the basic FR rule. All kinds of securities are an asset on the balance sheet. So if you have more assets all else being equal you will have more equity. The connection is that any unrealized gains from HFT and AFS securities will bypass the income statement and come into the balance sheet as Other comprehensive income, which is a part of equity. So if you have an unrealized gain on HTS, that will increase equity.

MS are mainly relevant when you are calculating balance sheet ratios, as it's a part of current assets. (so a part of all curren/quick/cash ratio)

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orang3eph

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3#
发表于 2011-7-13 15:38 | 只看该作者
Flok Wrote:
-------------------------------------------------------
> Well, technically Equity has nothing to do with
> all these kinds of securities...
>
> Equity is simply Asset less Liablities, which is
> the basic FR rule. All kinds of securities are an
> asset on the balance sheet. So if you have more
> assets all else being equal you will have more
> equity. The connection is that any unrealized
> gains from HFT and AFS securities will bypass the
> income statement and come into the balance sheet
> as Other comprehensive income, which is a part of
> equity. So if you have an unrealized gain on HTS,
> that will increase equity.
>
> MS are mainly relevant when you are calculating
> balance sheet ratios, as it's a part of current
> assets. (so a part of all curren/quick/cash ratio)

Yes you are correct about AFS and other stuff but your understanding about HFT is not correct here. Unrealized gains and losses on HFT do go to income statements and NI is affected.

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JGovender

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发表于 2011-7-13 15:38 | 只看该作者
I think he was referring to the equity method of accounting for unconsolidated subsidiaries.

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Maddin

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5#
发表于 2011-7-13 15:38 | 只看该作者
sorry, I wasnt refering to HFT and AFS but for HTM and AFS... unrealized gains on HFT securities come directly to the income statement. The other 2 will bypass income statement and will be stated as other comprehensive income.

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