Securities Available-for-Sale
{"Image DocumentName": "Securities Available-for-Sale", "Image ImageDescription": "Investments in debt or equity securities that are not for active trading and not to be held to maturity are classified as available-for-sale (AFS). Adjustments to fair value are recorded. in a valuation account called fair value adjustment, or as a direct adjustment to the investment account. as a net unrealized holding gain/loss in other comprehensive income (OCI), which accumulates in accumulated other comprehensive income (ACOI). When an investment is not classified as an HTM or trading security, it is classified as an allowance as available-for-sale (AFS). Available-for-sale securities are recorded on the balance sheet at fair value subsequent to acquisition. Adjustments to fair value are recorded in account called fair value adjustment, or as a direct adjustment to the investment account. The net unrealized holding gains or losses is shown in the account other comprehensive income (OCI), which accumulates in accumulated other comprehensive income (ACOI). The big concern is that including in net income unrealized holding gains and losses on AFS investments might make income appear more volatile than it really is. For example, many companies purchase AFS investments for the purpose of having the changes in fair value of those investments offset changes in the fair value of liabilities. This hedging insulates the company from risk and ensures that earnings are stable. However, if fair value changes for investments were to be recognized in income (as is the case with trading securities), but the offsetting fair value changes for liabilities were not recognized in income as well, we could end up with income appearing very volatile when in fact the underlying assets and liabilities are hedged effectively. Unrealized Gain. Unrealized Loss. Other Comprehensive Income (OCI)", "Image XResolution": "37", "Image YResolution": "37", "Image ResolutionUnit": "Pixels/Centimeter", "Image Software": "SlidePlayer", "Image YCbCrPositioning": "Centered"}