(Answered) Question - the fasb issued sfas no 115 to describe the

Accounting

Question - The FASB issued SFAS No. 115 to describe the accounting treatment that should be afforded to equity securities that have readily determinable market values that are not accounted for under the equity method or consolidation. An important part of the statement concerns the distinction between trading securities and available -for-sale securities.

Required:

a. Compare and contrast trading securities and available for sale securities.

b. How are the trading securities and available-for-sale securities classified in the balance sheet? In your answer, discuss the factors that should be considered in determining whether a security is classified as trading or available-for-sale and as current or noncurrent.

c. How do above classifications affect the accounting treatment for unrealized losses?

d. Why does a company maintain an investment portfolio containing current and noncurrent securities?

e. If a company elects to adopt fair -value accounting for securities that are classified as available-for-sale simultaneously with the adoption of SFAS No. 159, what effect would the election have on its financial statements?

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