Noninfluential Securities Accounting Identify and Essay

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A third type is available-for-sale (AFS) securities. These securities are not actively managed like traded securities, along the lines of debt and equity types. However, they are available to sell, "given the right combination of market factors" and the cash situation of the company (Securities available for sale, 2012, McGraw-Hill.). Sales are dependent upon contingent market factors. From an accounting standpoint, "like trading securities, we report investments in AFS securities in the balance sheet at fair value. Unlike trading securities, though, unrealized holding gains and losses on AFS securities are not included in net income. Instead, they are reported in the statement of comprehensive income as other comprehensive income (OCI). Also, "if the intent is to sell the securities within the longer of one year or the normal operating cycle, the securities are classified as short-term investment.

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Otherwise, they are classified as long-term investments" (Chapter 15 PowerPoint, 2009: Slide 10).

In terms of predictability of the investment, HTM are thus the most predictable and stable of all security types, followed by AFS securities, depending upon the circumstances of the market. This is followed by debt, then equity securities, the latter of which is the most dependent upon volatile economic conditions and the whims of the holder. Each circumstance requires a slightly different accounting technique, thus proper classification is essential to ensure that an accurate portrayal of the organization is rendered......

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