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How are unrealized gains or losses reported if a company converts a debt security from available-for-sale to trading or held-to-maturity?

If the debt security is converted to trading, then the unrealized gain or loss is recorded on the income statement. If the debt security is converted to held-to-maturity, then the unrealized gain or loss is recorded in other comprehensive income (“OCI”), which is part of stockholders’ equity on the balance sheet.


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  • How are unrealized gains or losses recorded for available-for-sale debt securities?

    If a company classifies a debt security as available-for-sale, any unrealized gains or losses are recorded to other comprehensive income (“OCI”), which is a component of equity on the balance sheet. Unrealized gains or losses are calculated based on the change in fair value over a reporting period (e.g. January 1st to December 31st). Gains […]

  • What are available-for-sale debt securities?

    Available-for-sale debt securities are neither trading securities, nor held-for-sale securities. These securities are reported as either current or noncurrent assets, depending on the company’s intent to sell in the near team. These securities will be reported at fair value. Unrealized gains or losses from available-for-sale securities will be reported in other comprehensive income (OCI).

  • Where does a company record the purchase of an available-for-sale security in the cash flow statement?

    When a company purchases an available-for-sale security, the purchase cost represents a cash outflow and would be recorded in the investing section of the cash flow statement. This is captured in #3 in the visual below.