CFA Practice Question

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CFA Practice Question

Unrealized holding gains and losses for trading securities are ______

A. reported as a separate component of the shareholders' equity section of the balance sheet.
B. included in the determination of income from operations in the period of the change.
C. reported as extraordinary items.
Correct Answer: B

User Contributed Comments 7

User Comment
rfvo Why would it no be income from investing?
warrentend1 Because it is not an investing activity, investing activities examples are purchasing a building etc
suzette Why not other income or income from financing activities?
bodduna Head for trading is very liquid. May be not more more than 3 months.
dividends received, Interest received& paid are treated as operating income under US GAAP.
mtsimone Trading securities are current assets, a component of operations.
davidt876 i see it as there are 2 types of investment activities:

1. long-term investing - which protects against inflation and employs a company's idle cash - which is on hand for unexpected liquidity needs - through a low risk strategy. this includes available-for-sale and held-to-maturity.

2. speculative investing - where you're speculating that you can profit from short-term mis-pricing in the market. this is held-for-trading.

long-term investments compliments your current operations, while trading is onto itself a different operation altogether. that's why held-for trading is included in net income (from operations)
pigletin there is no why? its all about the rules? just remember it as told
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