The Debt And Equity Securities

1064 Words5 Pages
Prior to 2016, both debt and equity securities could be classified as available for sale and their gains and losses reported in other comprehensive income; however, with the passing of Accounting Standard Update No, 2016-01, all equity securities must now be classified as trading and their unrealized gains and losses reported in earnings. The forthcoming evidence indicates that the financial statements better reflect the true risks taken by the company when the unrealized gains and losses on equity securities to appear in earnings rather than other comprehensive income. FASB issued Statement of Financial Accounting Standards No. 115 in May of 1993, which supersedes FASB Statement No. 12, Accounting for Certain Marketable Securities. The statement requires securities, with readily determinable fair values, be placed into one of three classifications: trading, available for sale, and held to maturity. Each of the three classifications has their own distinct reporting standards. Under this statement, equity securities can be classified as trading or available for sale, but debt securities can be classified as available for sale or held to maturity. Unrecognized gains and losses for available for sale securities are presented in other comprehensive income until they are recognized, at which time they are reclassified to the income statement. For the past ten years, the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) have
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