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Available for Sale (AFS) – Summary

  • According to the accounting standards, available-for-sale financial assets are those nonderivative financial assets that are designated as available for sale or are not classified as loans and receivables, held-to-maturity investments, or financial assets at fair value through profit or loss.
  • Available-for-sale securities are debt or equity investments that are held for an indefinite period of time without any intention to resell for profit.
  • They are not trading assets, as in the case of short-term assets held for speculation, nor are they acquired with an intention to hold till maturity.
  • If there is an increase in the market rate over and above the purchase rate of AFS securities, then such increase is recorded as part of the other comprehensive income (OCI) and not recognized as income in the current period. The is shown as part of the shareholders’ equity in the balance sheet.
  • Any foreign exchange gains and losses on monetary assets are recognized in the statement of profit and loss except for those items that are designated as hedging instruments.
  • Equity instruments being nonmonetary assets, the gain or loss including any related foreign exchange component is recognized directly in the appropriate equity account.
  • In the balance sheet a nonmonetary financial asset such as an investment in equity instrument is translated using the closing rate if it is carried at fair value in the foreign currency, and using the historical rate if it is not carried at fair value when its fair value cannot be reliably measured.
  • As per the U.S. GAAP Statement of Position, it is not mandatory to show separately the capital gains/loss due to change in the market rate of the asset, or currency gains/loss due to change in the foreign exchange rate, although the SOP indicates that such separate reporting would provide valuable information to the users of the financial statements.
  • If an equity instrument measured at fair value with gains and losses recognized in the appropriate equity account becomes impaired, the cumulative net loss recognized in the equity account, including any portion attributable to foreign currency changes, should be recognized in the statement of profit and loss.
  • If the equity securities classified as available-for-sale are sold, then the realized gains/loss on such sale is transferred from the OCI to the income statement and an entry is recorded to that effect.
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{ 7 comments… add one }

  • Pete August 13, 2009, 10:05 am

    Are Investments Available for sale classified as a Current Asset or Non-Current?

    • R. Venkata Subramani August 20, 2009, 12:45 am

      It is the usual practice to classify AFS investments as non-current assets, even though the ultimate test would depend upon the intention with which the investments are made.

      • Prakash Ramaswamy April 17, 2012, 1:54 pm

        True. The securities which are purchased not with the intent of short term trading as well not to keep till maturity. This creates a new OCI or other comprehensive income which will be adjusted in the value of the security. However, based on the extant rules or policies, they may be transferred to any other holding portfolios. In short, any security in AFS to be classified as Non current asset.

      • Amit December 27, 2012, 12:09 pm

        Dear Venkata Sir,
        This is amit, recently join in treasury management. I have bought books (Accounting for Investments Volume 1&2). I’m from engineering background, struggling with accounting stuff. I have following quires and looking for solution,
        1. What are FI instrument accounting entries for treasury
        2. Accounting entries at ‘Position Transfer’
        3. Accounting entries at ‘Portfolio Transfer’ (example from Long Term – Non Current portfolio to Short term – Current portfolio) how accounting entries will pass.
        4. What are the incidental charges, when bank issue a bond or become investor.
        5. When a bank issue FI securities through primary market, accounting will pass at application or at allotment.
        I’ve very little idea about financial securities but pretty much new to accounting financial securities. I’m referring above said books written by you. Please guide me how go about ‘Treasury’ as its deals with FX, FI and Derivatives. Deal booking to back office operation.

  • Gohar July 15, 2010, 3:19 am

    Can HTM be sold before their maturity if yes what are the financial effect on accounts and reclassification of the same.

  • Robinston September 7, 2011, 3:00 am

    Dear Venkat

    When an 100% impaired AFS asset sold should the sale proceed be

    1. shown as a separate line item in the income statement
    2. shown as other income
    3. does this require a special disclosure in the FS

    Kindly advice, thanks

  • Paulo February 9, 2012, 11:45 am


    Which extract from IFRS states that equity instruments are unarguably non-monetary items?


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