CFA CFA Level 2 Still puzzled by the difference between “Held-For-Trading” and “Available-For-Sales”

Still puzzled by the difference between “Held-For-Trading” and “Available-For-Sales”

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  • wannabe1988
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    Despite the explanations, I still struggle to understand the distinction between the two securities. I understood the difference in mechanism (realized/unrealized g/l for AFS goes to Other Comprehensive Income) but what makes a firm decided to categorise one or the other? 

    itsalwayslupus
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    Practically speaking, it depends on company policy. Available for Sale functions as sort of a catch-all for any securities that the company can’t decide whether they are Trading Securities or Held to Maturity.

    From a CFA perspective, if a question did directly ask you this, it usually is made fairly obvious in the passage (e.g. “Jonah Underwood, CFA, is not planning to hold Security A to maturity. He wants the security’s unrealized gains/losses to be reflected in the income statement. What accounting treatment should be used for Security A?”)

    wannabe1988
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    Thanks for the explanation! Somehow it helps! Apparently from 2015 onward, AFS for debt is not longer permissible – it’s either Held-to-maturity or Held-for-trading. Nevertheless, based on your example, doesn’t seems like it’s going to be a big problem so long we understood how it affects the financial statements.  

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