held for trading vs available for sale securities

[KMeriwetherD]

I think I understand the difference but I am not sure
held for trading—– securities that are plannning to be sold (but not mature?) in the short term. A profit is expected. I guess a short term bond held to its maturity (not sold) would be considered held to maturity?
available for sale—–crap securities that you just want to unload? seriously though, is the only destinction between held for trading and available for sale the likelihood that it will be a profitable sale?

 

[cpk123]

The Sale of either of HFT (Held for Trading) or AFS (Available for Sale) securities has nothig to do with the maturity of the security. They are designations applied to the security, and held on the portfolio purely for the purposes of generating profits.
A Held to Maturity (HTM) security on the other hand, once so designated, should be kept on the books all the way to the maturity of the security. It would amortize - and SHOULD NOT BE SOLD.
====
in either of the AFS or HFT security - any profit / loss made due to the trade / sale - makes its way to the income statement.

 

[KMeriwetherD]

ok, very good… now I am more clear on what HTM is ….. that category can include short term debt instruments as long as they will not be sold.
still unclear on the difference between HFT and AFS. I need to know the difference because even though upon sale they are both treated the same…. unrealized gains or losses are not ( AFS unrealized +/- goes in OCI)

 

[cpk123]

with S2000Magician’s permission -> http://financialexamhelp123.com/investments-in-financial-assets/

 

[KMeriwetherD]

perfect! I go there all the time. Those articles are the best.

 

[S2000magician]

cpk123 wrote:with S2000Magician’s permission -> http://financialexamhelp123.com/investments-in-financial-assets/

I didn’t even recall writing that article. Thanks, CPK!
There’s some good stuff in there.

 

[Flashback]

In HFT category are securities which are traded on daily basis, they are always short term category.
AFS is quite difficult to understand. In this category are securities which often are not traded on daily basis
but not hold to maturity, example is 10 % shares in another company.
IFRS distinguish these 2 category by different accounting approach.
HFT or Fair value through P/L (the name of this category in IFRS) - realized and unrealized loss/gains are shown in P/L (Income statement).
AFS - unrealized loss/gains are not shown in P/L than in OCI, concrete in capital surplus account.