Avail-for-Sale vs Trading available, practice, possible, methods

bcp901

One of the practice exams said that D/E ratio is the same for both methods. How is this possible when Unrealized gains/losses under available for sale securities are reflected in the S/H Equity portion of the Balance sheet????

Rasec

I believe this is because under the trading method, unrealized gains and losses are recognized on the IS, so they flow through to S/H Equity in retained earnings. So in the end unrealized gains/losses show up in S/H equity for either method.

DSquaredSlim

Trading gains losses: Reflected on IS, which plows through to retained earnings which falls under the equity section.

AFS gains/losses: Reflected as a direct charge to equity, bypassing the income statement.


They are the same, with the exception of whether or not the amount gets reflected on the IS.

NO EXCUSES

llxx

How does the taxes on amounts that pass through IS affect this ?

kkn006

You do the same in equity too..so you add after tax G/L.