Question

Which of the following statements related to securities is not true:

a.Equity securities without a readily determinable fair value are recorded at cost with impairment losses reported in earnings.
b.Held-to-maturity securities are recorded at amortized cost.
c.Unrealized gains and losses related to trading securities are reported in earnings.
d.Unrealized gains and losses related to available-for-sale securities are reported in earnings.

Answer 1

The incorrect statement about securities is that d. unrealized gains and losses related to available-for-sale securities are reported in earnings. They are actually reported in other comprehensive income.

Step-by-step explanation:

The statement related to securities that is not true is: "Unrealized gains and losses related to available-for-sale securities are reported in earnings." The correct statement is that unrealized gains and losses for available-for-sale securities are reported in other comprehensive income (OCI) until they are sold, at which point the gains and losses are reclassified from OCI to earnings.

Held-to-maturity securities are indeed recorded at amortized cost, and unrealized gains and losses on trading securities are reported in earnings. Equity securities without a readily determinable fair value are recorded at cost minus impairment, with any impairment losses reported in earnings, as per the accounting standards.