[CPA Dex]

Wiley 2011:

Pg. 544 # 7

What amount shout Tyne report as unrealized gain assuming Tyne does not elect to use the fair value option to report its investments?

One investment is a trading security and the other is Avail 4 sale. These are both valued at fair value, so I don’t understand why the problem says they elect not to report them at fair value. What other choice do they have? I don’t get it.

Noah

[Anonymous]

It looks like this is intended to be a trick question of sorts. No matter whether the company elects the fair value option or not, Trading and AFS securities are valued at Fair Value.

[CPA Dex]

Thanks for the reply. I don't think it's a trick question. All of the questions in the book look like this. I just posted the first one I came across. I must be missing something. # 8,9,10 also say the same thing… that “the company does not elect the fair value option”.

Noah

[rknight21]

I recently figured this out myself the other day.

Yes they are both valued at FV but the arguement of whether they elect FV is talking about how it is recorded at year end.

Electing FV means that both AVS and TS are adjusted to FV at year end and recognized in the income statement.

Not electing FV means that AVS is adjusted to FV at year end but is recognized as unrealized gains in other comprehensive income in the balance sheet…

in short electing FV means all gains and losses goes to the income statement and not electing FV means changes to TS goes to IS while unrealized gains on AVS goes to the BS.

[whatkey]

@rknight21 – That is my take on it as well.

Using Becker, Ninja Notes, and CpaReviewForFree

FAR - 87 (2/17)
REG - 89 (4/21)
AUD - 89 (5/31)
BEC - 89 (7/11)

[CPA Dex]

Ohhhh. Makes perfect since now. Couldn't find that anywhere in the Wiley book. Thanks!

Noah

[ledgermaven]

I'm on the investments chapter this weekend, and rknight 21 is correct. Only trading is being asked about because the question wants to know what amount goes to the income statement. If the Fair Value Option was used (not just being valued at Fair Value), then both trading and AFS go to the income statement. Blame FASB for using similar words with so many different variations on meanings!

AFS not being used under the Fair Value Option is reported in other comprehensive income.

Good luck.

[Anonymous]

Sorry – I didn't look up the question so didn't realize it was asking about a specific statement. I thought what you posted was the actual question. So like others have said, they are always reported at FV even if the FV election is not chosen, but what differs is whether the unrealized G/L from AFS securities goes to the IS or into OCI.

[ledgermaven]

@apbandj: you started studying FAR after me and finished before me and passed first time, I figure you know a lot off the top of your head, good work! I'm using Yeager too and still plugging away…

[Anonymous]

@ledgermaven – How long have you been studying for FAR? I studied for 4 months. Yaeger was definitely good – I still have 3/4 of the FAR concepts ingrained in my brain – unlike most people, I am actually hoping to see some FAR stuff on my AUD exam in a few weeks! I think AUD is definitely my weakest area.

[ledgermaven]

I started in September with big breaks for kids school activities so it was more like a hobby. In serious mode now, hoping to finish last 5 of the Yeager DVDs with one per week by end of Feb. I'll have March to review and hope to have a date for mid April. I just applied for my first section so it will take some time for them to get back to me.

Good luck in Aud!

[Anonymous]

I hate this part when they say “assume company x does/does not elect the FV option…..lol

[Author]

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