Available for sale

Accounting

Historical cost Constant purchasing power Management Tax
Major types Auditing Cost Forensic Financial Fund Governmental Management Social Tax
Key concepts Accounting period Accrual Constant purchasing power Economic entity Fair value Going concern Historical cost Matching principle Materiality Revenue recognition Unit of account
Selected accounts Assets Cash Cost of goods sold Depreciation / Amortization Equity Expenses Goodwill Liabilities Profit Revenue
Accounting standards Generally-accepted principles Generally-accepted auditing standards Convergence International Financial Reporting Standards International Standards on Auditing Management Accounting Principles
Financial statements Annual report Balance sheet Cash-flow Equity Income Management discussion Notes to the financial statements
Bookkeeping Bank reconciliation Debits and credits Double-entry system FIFO and LIFO Journal Ledger / General ledger T accounts Trial balance
Auditing Financial Internal Firms Report
People and organizations Accountants Accounting organizations Luca Pacioli
Development History Research Positive accounting Sarbanes–Oxley Act
Business portal

Available for sale (AFS) is an accounting term used to classify financial assets. AFS is one of the three general classifications, along with held for trading and held to maturity, under U.S. Generally Accepted Accounting Principles (US GAAP), specifically FAS 115. The IFRS also includes a fourth classification: loans and receivables.

US GAAP Treatment

Under US GAAP, AFS assets represent securities and other financial investments that are non-strategic, that are neither held for trading, nor held to maturity, nor held for strategic reasons, and that have a readily available market price. As such, the gains and losses resulting from marking AFS investments to market (revaluing them to market price / fair value each period) are not included in Net Income (unlike the gains and losses associated with "trading" investments) but are reflected in Other Comprehensive Income (income statement / retained earnings) and Accumulated Other Comprehensive Income (balance sheet) until they are realized (sold).^[1]^[2]

IFRS Treatment

Under IFRS, AFS assets are defined as being all financial assets that do not fall into one of the other classifications. As such, the treatment closely follows that of US GAAP. Gains or losses from revaluation of the asset are put through a reserve in Shareholders' Equity, except to the extent that any losses are assessed as being permanent and the asset is therefore impaired (under IAS 39, paragraph 58), or if the asset is sold or otherwise disposed of. If the asset is impaired, sold or otherwise disposed of, the revaluation gain or loss implicit in the transaction is recognised as a revenue or expense.

Starting in 2018, this treatment will be overridden by IFRS 9, according to which the revaluation gain or loss will be recognized under Other Comprehensive Income whether it be due to normal market fluctuations or impairment. Further, the revaluation gains or losses from Other Comprehensive Income will under no circumstances be recycled into Profit and Loss.

References

↑ Financial Accounting Standards Board, "Summary of Statement No. 115" Retrieved August 23, 2014.
↑ Financial Accounting Standards Board, "Statement of Financial Accounting Standards No. 115" Retrieved August 23, 2014.

This article is issued from Wikipedia - version of the 7/3/2015. The text is available under the Creative Commons Attribution/Share Alike but additional terms may apply for the media files.

Available for sale

US GAAP Treatment

IFRS Treatment

See also

References