These are debt and equity securities which the investor is willing to sell but not actively planning to sell.
· Available for sale securities are initially measured at Fair value + Transaction Costs
· At each subsequent reporting date, these investments are re-measured and reported at fair value excluding transaction costs.
· Any unrealized gains or losses arising from changes in fair value are reported in Equity as Other Comprehensive Income (U.S. GAAP) and directly to Equity (IFRS).
· The amount reported in Other Comprehensive Income is net of taxes.
· If the security is sold, the cumulative gains or losses previously recognized in Other Comprehensive Income is reclassified (i.e. removed from other Comprehensive Income) and reported on the Income Statement.
· Interest received on debt securities and dividends received on equity securities are reported in Income Statement.
Accounting Treatment of Available for Sale Debt Securities (in the case of foreign exchange gains / losses):
IFRS: Total change in Fair value of an available for sale debt security is divided into two components:
a) Any portion related to Foreign Exchange gains & losses is recognized on the Income Statement.
b) The remaining portion is recognized in Other Comprehensive Income.
U.S. GAAP: Total change in fair value of available for sale debt securities (including foreign exchange gains & losses) is included in Other Comprehensive Income.
Accounting Treatment of Available for Sale Equity Securities:
Under both IFRS and U.S. GAAP, total change in fair value of available for sale equity securities (including foreign exchange gains & losses) is included in Other Comprehensive Income.