- CFA Exams
- CFA Level I Exam
- Study Session 7. Financial Reporting and Analysis (2)
- Reading 22. Understanding Balance Sheets
- Subject 3. Financial Instruments: Financial Assets and Financial Liabilities
CFA Practice Question
Northern Company reports unrealized gains (losses) on its short-term investment portfolio in other comprehensive income (OCI). Its investment portfolio is classified as ______.
A. trading
B. available-for-sale
C. held-to-maturity
Explanation: Unrealized gains (losses) for available-for-sale investments bypass the income statement and are recorded directly in stockholders' equity in other comprehensive income (OCI). For securities classified as "trading," these unrealized gains (losses) are reported in current income and affect stockholder's equity via the updating of retained earnings.
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