Transfers of Securities: Between Categories, ASC 320

Reclassification of Investments in Securities

1. All securities reclassified
–> from one category to another
–> are transferred at fair value

2. From Trading to Other
–> Unrealized Holding Gain and Loss (HGL) at transfer date
–> already recognized in earnings
–> not reversed

3. From Other to Trading
–> Unrealized Holding Gain and Loss (HGL) at transfer date
–> recognized in earnings immediately

4. From HTM to AFS
–> Unrealized Holding Gain and Loss (HGL) at transfer date
–> recognized in OCI

5. From AFS to HTM
–> Unrealized Holding Gain and Loss (HGL) at transfer date
–> stays in OCI
–> amortized over remaining life of security

6. Following transfers should be rare
–> from HTM to Other
–> from Trading to Other
–> from Other to Trading

7. Classification
–> reassessed at the end of each reporting period

OCI: Other Comprehensive Income
Trading: Trading Securities
AFS: Available-for-Sale Securities
HTM: Held-to-Maturity Securities
HGL: Holding Gain and Loss
FVPL: Financial Assets and Financial Liabilities at Fair Value through Profit or Loss

IAS 39 Before October 2008 Amendment

Financial instrument
–> not allowed to be transferred into FVPL
–> not allowed to be transferred out of FVPL

October 2008 Amendment to IAS 39

Financial instrument
–> not allowed to be transferred into FVPL
–> after initial recognition

Financial instrument
–> not allowed to be transferred out of FVPL
–> if it was designated as FVPL before

Derivative
–> not allowed to be transferred out of FVPL

Financial instrument
–> currently classified as “held-for-trading”
–> allowed to be transferred out of FVPL,
–> if certain conditions are met

Financial instrument
–> currently classified as “Available-for-Sale”
–> allowed to be transferred to Loans and Receivables,
–> if certain conditions are met

Reasons for Amendments in October 2008
–> to be consistent with U.S. GAAP

[U.S. GAAP, SFAS 115]
Reclassification out of Trading
–> allowed, in rare situations

[U.S. GAAP, SFAS 65]
Reclassification
–> out of Mortgage Loans Held for Sale
–> into Mortgage Loans Held for Long Term Investments
–> allowed, if certain conditions are met

 

© AccountingInfo.com