[MCLKT]

If you sell AFS Securities for a gain how is it recognized?

I thought all gains/losses show in OCI net of tax, but a Wiley question states :

“Since these equity securities were not purchased with the intent to sell them in the near term for a quick profit, they must be classified as available-for-sale securities [yep, that’s what I thought]….Therefore, the gain is $150,000…Note that the tax rate (40%) is not used [huh?] ; components of income from continuing operations [wait, what? cont. ops???] are reported gross with income tax expense deducted from the total income from continuing operations.”

Why are Available For Sale securities booked in continuing operations?

A:[73]97 F:[74]85 R:86 B:[74]82
*NINJA 10 Pt. COMBO & Yaeger*

[Anonymous]

Unrealized Gain and loss is recorded in OCI as net of tax ( normally , i have never seen question going into that depth)

Realized gain/ loss is recognized in continuing operation ( not net of tax) ..

may be in question there should be some hint that gain is realized either by saying permanent recognized or something..

if not can you write entire question.??.;-)

[Anonymous]

lol just read your subject – the disposal AFS is always reported on continuing operation ( not net of tax) as the gains are realized .. 😀

[MCLKT]

THANKS NAM!!! I was going to post this in FAR study group, but thought my groupies (lol!) may be too busy studying.

So, only the unrealized g/l go to OCI, once they are sold (or realized) then it's operating income.

I'll add that factoid to my note card 🙂

A:[73]97 F:[74]85 R:86 B:[74]82
*NINJA 10 Pt. COMBO & Yaeger*

[Author]

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