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Available for sale (AFS) is an
accounting Accounting, also known as accountancy, is the measurement, processing, and communication of financial and non financial information about economic entities such as businesses and corporations. Accounting, which has been called the "langu ...
term used to classify
financial asset A financial asset is a non-physical asset whose value is derived from a contractual claim, such as bank deposits, bonds, and participations in companies' share capital. Financial assets are usually more liquid than other tangible assets, such as ...
s. AFS is one of the three general classifications, along with held for trading and held to maturity, under U.S. Generally Accepted Accounting Principles (US GAAP), specifically FAS 115. The
IFRS International Financial Reporting Standards, commonly called IFRS, are accounting standards issued by the IFRS Foundation and the International Accounting Standards Board (IASB). They constitute a standardised way of describing the company's f ...
also includes a fourth classification:
loan In finance, a loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations, etc. The recipient (i.e., the borrower) incurs a debt and is usually liable to pay interest on that de ...
s and receivables.


US GAAP Treatment

Under US GAAP, AFS assets represent debt securities and other financial investments that are non-strategic, that are neither held for trading, nor held to maturity, nor held for strategic reasons, and that have a readily available market price. As such, the gains and losses resulting from marking AFS investments to market (revaluing them to market price /
fair value In accounting and in most schools of economic thought, fair value is a rational and unbiased estimate of the potential market price of a good, service, or asset. The derivation takes into account such objective factors as the costs associated ...
each period) are not included in Net Income (unlike the gains and losses associated with "trading" investments) but are reflected in Other Comprehensive Income (income statement / retained earnings) and Accumulated Other Comprehensive Income (balance sheet) until they are realized (sold).Financial Accounting Standards Board
"Statement of Financial Accounting Standards No. 115"
Retrieved August 23, 2014.


IFRS Treatment

Under IFRS, AFS assets are defined as being all financial assets that do not fall into one of the other classifications. As such, the treatment closely follows that of US GAAP. Gains or losses from revaluation of the asset are put through Other Comprehensive Income in
Shareholders' Equity In finance, equity is ownership of assets that may have debts or other liabilities attached to them. Equity is measured for accounting purposes by subtracting liabilities from the value of the assets. For example, if someone owns a car worth $2 ...
, except to the extent that any losses are assessed as being permanent and the asset is therefore impaired (under
IAS 39 IAS 39: Financial Instruments: Recognition and Measurement was an international accounting standard which outlined the requirements for the recognition and measurement of financial assets, financial liabilities, and some contracts to buy or sell n ...
, paragraph 58), or if the asset is sold or otherwise disposed of. If the asset is impaired, sold or otherwise disposed of, the revaluation gain or loss implicit in the transaction is recognised as an income or expense. Starting in 2018, this treatment will be overridden by IFRS 9, according to which, for equity instruments, the revaluation gain or loss will be recognized under Other Comprehensive Income whether it be due to normal market fluctuations or impairment. Further, the revaluation gains or losses on equity instruments from Other Comprehensive Income will under no circumstances be recycled into Profit and Loss.


See also

* Accompanying notes to the financial statements *
Accounting standard Publicly traded companies typically are subject to rigorous standards. Small and midsized businesses often follow more simplified standards, plus any specific disclosures required by their specific lenders and shareholders. Some firms operate on th ...
*
Financial asset A financial asset is a non-physical asset whose value is derived from a contractual claim, such as bank deposits, bonds, and participations in companies' share capital. Financial assets are usually more liquid than other tangible assets, such as ...
* Balance sheet *
Other comprehensive income Note: Reference cited below, FAS130, remains the most current accounting literature in the United States on this topic. In 1997 the United States Financial Accounting Standards Board issued Statement on Financial Accounting Standards No. 130 ent ...


References

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US GAAP Generally Accepted Accounting Principles (GAAP or U.S. GAAP, pronounced like "gap") is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC) and is the default accounting standard used by companies based in the Un ...