Ask Joey ™ a Question

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

As the visual below shows, any unrealized gains or losses would be recognized on the income statement when a debt security is converted from trading to AFS or held-to-maturity. The unrealized gain or loss would be based on the change in fair value from the beginning of the period to the end of the period.


You might also be interested in...

  • What are the three classifications for debt securities?

    A debt security is any security that is representing a creditor relationship with an outside entity. The three classifications under U.S. GAAP are trading, available-for-sale, and held-to-maturity.

  • Where are unrealized gains or losses for debt trading securities recorded?

    Unrealized gains or losses are recorded directly to the income statement for the change in fair value that occurred during the period. The visual below compares the treatment for debt trading securities to the other two types of debt securities, which are available-for-sale and held-to-maturity.

  • 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 […]