Held for Trading effect on NI period, number, correct, question, computing

Kapie

On page 256, of FRA, question 32.

The correct answer is c, but the unrealized gain is +$1 million, not +$5 million. They are computing the unrealized gain of Dunbar as $55 - $50, which I don't think is correct. The unrealized gain is $55-$54 =+$1... gain/loss is a period to period number. Agreed?

tianxin

$ 5MM to net Inc if you reclassify Dunbar since it's currently held at cost of $ 50 MM, Cora to a avail for sale since there would be a loss and reflected in eqy.

senlinlang

You guys are awsome... so if you were to reclassify Baron which is currently AfS (cost=$25, end2008=$29, and end Q1 2009=$28), to HfT, you would compute unrealized gain as $28-$29=-$1 ? But not if it was HtM?

random_walker47

No Dreary; Baron's unamortized cost is 25m, market value March 31 is 28m, so you'd recognize a gain on NI as 3m. Much in the same way when we reclassify Dunbar as HFT, gain is 5m since there's 5m gain from 50m cost to 55m Q1 value. Any unrealized G/L for HFT is always reported as income. Someone please correct me if I'm wrong.


Clarification: I believe you'd be correct (1m loss) if it had been HFT from the start. But since we're reclassifying, I think you have to use cost as the basis and work G/L from there.



Edited 1 time(s). Last edit at Thursday, June 2, 2011 at 10:28AM by Shock6822.