Investment in stock carried on the equity basis and investments in consolidated subsidiaries are not covered by this pronouncement. It applies to other investments in equity securities that have readily determinable values and to all investments in debt securities.

HELD TO MATURITY securities are debt securities which the enterprise has the intent and ability to hold to maturity. These are reported at amortized cost.

TRADING securities are debt and equity securities held principally for selling them in the near term. They are reported at fair value, with unrealized gains and losses included in earnings.

AVAILABLE FOR SALE securities include all other debt and equity securities, and are reported at fair value. Unrealized gains and losses are excluded from earnings and reported in a separate component of shareholders’ equity.

Trading securities are current assets. Cash flows from trading securities are operating cash flows.

The usual current/noncurrent criteria are used to determine the category in which to report held to maturity and available for sale securities. Cash flows from purchases and sales of available for sale and held to maturity securities are investing cash flows.

The transfer of a security between categories of investments is accounted for at fair value. At the date of the transfer, if the security is transferred:

  • Into trading, unrealized holding gain or loss is recognized in earnings immediately.
  • From trading, unrealized holding gain or loss will have already been recognized and is not reversed.
  • From held to maturity into available, unrealized holding gain or loss is recognized as a separate component of shareholders’ equity.
  • From available into held to maturity, unrealized holding gain or loss continues to be reported in a separate component of shareholders’ equity, but is amortized over the remaining life as an adjustment to yield.
For available for sale or held to maturity securities, a decline in value below carrying value that is other than temporary is recognized as a loss and the cost basis of the individual security is written down to fair value. The new cost basis is not changed for subsequent recoveries in fair value.


Now that you have read this example of a summary from our self study book, you may be interested in what you might do next to prepare for the CPA exam.

Many people choose to concentrate their efforts on two or three sections of the exam to increase their chance of earning conditional credit. One way of doing this is to concentrate on those areas in which you are strongest. However, there are other approaches.

While continually updating our books we see the frequency of changes taking place in the exam. BEC changes the least rapidly, and REG (tax) the most rapidly. If your accounting classes are recent, you might consider putting more effort into Regulation. It makes sense to get the areas out of the way where your classroom work becomes “obsolete” due to new rules most quickly. FAR probably changes a little faster than Auditing, although the AICPA has been pretty active recently with new SAS and SSAE pronouncements.

Many people doing make a list of questions while studying and use e-mail to ask questions (telling us the page they are looking at in our book).

Good luck with your studies!


For information on self study books, click on self study books. To order self study books, call Monday through Friday from 9 to 5 Mountain time. The phone number is (208) 233-3222 and the fax number is (208) 234-2154. If you would like to know more about AIS, see about ais.

Accounting Institute Seminars┬« (AIS) offers self study CPA exam books. Most are available on-line, for download to your computer. The electronic version is less expensive than paper books. You can magnify pages on your screen, fill the screen (view – full screen), search for terms (tools – find), and print pages. Best of all, you can start studying it now instead of waiting days for it to arrive!

Here is the list of our currently available E-BOOKS CPA REVIEW.

For more information on e-books or for paper copies, refer to CPA REVIEW SELF STUDY BOOKS.

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