These are debt or equity securities acquired with the intent to sell them in the near term.
· Held-for-Trading securities are reported initially at Fair value on the balance sheet.
· Transaction costs are not included in fair value; neither initially nor subsequently.
· At each reporting date, these investments are remeasured and reported at fair value.
· Any unrealized gains or losses arising from changes in fair value are reported in Income Statement.
· Interest received on debt securities and dividends received on equity securities are reported in Income Statement.
Summary of Accounting Treatment of Held-for-Trading
1. Balance sheet value = Fair value of Bond
2. Interest Revenue = Value of Bond(t-1) × market interest rate at issuance
· Interest Revenue is recognized in the Income Statement.
3. Unrealized Gain/loss = Fair value – carrying amount (adjusted for the difference between coupon and interest revenue)
· Unrealized Gain/loss is recognized in the Income Statement.
4. Realized Gain/loss = Sale price – Fair value
· Realized Gain/loss is recognized in the Income Statement.