[yankees1987]

What happens when you have unrealized gains/loss’s on AFS securities for year one and year two, and in year two you change over to trading. Do you take the unrealized gains/losses from year one and two and recognize that in current income? or just from year two…Thanks.

[Trevor]

I am trying to process (taking FAR this period). So the thought here is that for AFS the unrealized gains go to OCI while for trading securities the unrealized gains go to Inc from cont. ops. My thought is that you would reverse the entry for OCI so that your Acc. OCI is zero (Dr. unrealized gain and Cr. allowance). Then I would say at the end of yr 2 write up to FMV for the 2 yrs…(Dr. allowance and Cr. unrealized gain). thats my thought… im interested now too!

BEC: 73,81(7/6/2010); AUD: 75(5/24/2010); FAR: 76(8/31/2010); REG: 77 (10/18/2010) - DONE!!!!

[yankees1987]

Yeah i think you take both unrealized gain or loss and put that into income from continuing operations, but i'm not 100%. Becker says that you take the unrealized holding gain or loss at the date of the transfer into earnings immediately. So would that take into account year one AND year two?

[gabe1475]

Transfer to or from Trading is one of the easier ones to remember. Transfer to Trading from any category realize gains and losses on IS right away. Transfer from Trading to any other category do not reverse what you have recognized to that point. Now you only need to remember AFS to HTM and HTM to AFS.

FAR - 95
AUD - 82
REG - 94
BEC - 84

[yankees1987]

So you take year one and year two and put that in earnings immediately?

[Trevor]

So to put dates on the example… I bought a bond on 1/1/2009 and on my 12/31/2009 F/S I classified it as AFS, then on 3/15/2010 I recalssified the bond to Trading. On 3/15/2010 I would make an entry to eliminate my acc. OCI, and then make another entry to adjust to the 3/15/2010 FMV as a trading security. Then on 12/31/2010 I would make another entry to write-up/down the trading security. Does that make sense??? :/

**write-up/down may not be the right terminoligy, but thats how I think of it.

BEC: 73,81(7/6/2010); AUD: 75(5/24/2010); FAR: 76(8/31/2010); REG: 77 (10/18/2010) - DONE!!!!

[gabe1475]

Trevor that is correct. Yes, you would take into income as soon as you transfer to Trading and reverse from OCI. They have decent charts you can look at in Wiley, not sure about Becker, but I would be surpirsed if they did not have this. Out of trading you leave what was recognized through that point.

FAR - 95
AUD - 82
REG - 94
BEC - 84

[yankees1987]

this might be dumb but i dont care – so in year one i have an unrealized gain of 50 – then in year two i have an unrealized gain of 150 – both of which is in OCI – then in year two i reclassify to Trading i take both the unrealized gain of 50 in year one and the unrealized gain of 150 in year two and recognize the total 200 in earnings immediately…

thanks a lot.

[Trevor]

My first question would be why are you putting your year 2 unrealized gain into OCI if you reclassified the investment during year 2. The 150 for year 2 would be an end of the year adjustment, thus post reclassification. In effect you realize both years gian on the CY income stmt., but in 2 separate journal entries, one at the date of the reclass and the second at the date of the financials.

Does this help?

BEC: 73,81(7/6/2010); AUD: 75(5/24/2010); FAR: 76(8/31/2010); REG: 77 (10/18/2010) - DONE!!!!

[yankees1987]

i saw a question like that – i forget where and i cant find it again those are the details i can remeber tho. i'm thinking i have it messed up bc the year two 150 unrealized gain includes the 50 from year one so you would only recognize the 150.

[Anonymous]

I'll see if I find a good question from my becker stuff….wouldn't you leave the “unrealized gain/loss” in OCI recognized in year one and just adjust year two? That's what I thought…

[Anonymous]

The comment from gabe is corrrect.

“Transfer from Trading to any other category do not reverse what you have recognized to that point”

[gabe1475]

yankees1987 – yes, you would take the first two years OCI and reclass the entire amout to the Income Statement when moved to Trading.

Trevor – this can actually happen if you have unrealized gains at some point through the year where you adjust the security to FMV, adjustments don't always happen at the end of the year, you can issue quarterly and 6mo statements.

FAR - 95
AUD - 82
REG - 94
BEC - 84

[Author]

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