This audio will introduce you to reclassifications of securities. It will also enable you to understand the adjustments with regards to unrealized gains and losses in case of reclassification of securities.
Reclassification of securities are accounted for at fair value taking into consideration any unrealized holding gains or losses. When a security is transferred from trading securities, recognized unrealized gains or losses as of that date should not be reversed. When a security is transferred into a trading securities, unrealized holding gains and losses are recognized immediately. Held to maturity securities when reclassified to available for sale securities, must be restated to fair value. Any unrealized gains or loss is reported as accumulated other comprehensive income, in the stockholders’ equity in the balance sheet. Available for sale securities when reclassified to held to maturity securities, unrealized gains and losses is also reported as accumulated other comprehensive income, in the stockholders’ equity in the balance sheet. However, such gains or losses is then amortized over the remaining life of the security as an adjustment to yield.
Thus, when held to maturity securities are reclassified as available for sale securities, unrealized gains or losses are reported as accumulated other comprehensive income. When held to maturity securities are reclassified as trading securities, unrealized gains and losses are recognized immediately. When available for sale securities are reclassified as held to maturity securities, unrealized gains and losses are reported as accumulated other comprehensive income and, such gains or loss is amortized over the useful life of security. When available for sale security is reclassified as trading security, unrealized gains and losses are recognized immediately. When trading securities are reclassified as held to maturity securities or available for sale securities, unrealized gains and losses previously recognized are not reversed.