ACC 497 Accounting for Investments Paper

ACC 497

Accounting for Investments Paper

The world of accounting and investment securities can be challenging. There are plenty of guidelines, rules, and regulations that help smooth the accounting world into making sure that all of them are taken seriously. The FASB or Financial Accounting Standards Board set a requirement for companies to assign their portfolio of investment securities into three categories. This requirement is called the FASB ASC 320. Those categories include; trading securities, securities available for sale, and held-to-maturity securities. There are different treatments for each category along with their own definition. Companies will also have a requirement to assign each category into its current and noncurrent portions. There are some arguments that suggest treatment might allow companies to manage earnings while others suggest that the only proper accounting treatment for all marketable securities is current value. Each position will have their own discussion and neither argument is incorrect.

To define each category, evaluating the FASB requirement and online research is critical. The first category to examine is trading securities. “Trading securities are securities that have been purchased by a company for the purpose of realizing a short-term profit” (CFI, 2020). To account for trading securities the fair value method is used. This is when the value of the securities on the company’s balance sheet is equivalent to their current market value. The securities will be recorded in the current assets section under short-term investments account. This will offset the equity section under the unrealized proceeds from sale of short-term investments account (CFI, 2020). The income statement will show gains or loss of sale of trading securities in the operating income. Trading securities will reflect on both the income statement and the balance sheet.

Securities available for sale is another category to examine. Securities available for sale or shortened to AFS, is defined as debt and equity securities that are held principally for selling them in the near future or term. These securities will be reported at fair value. The unrealized gains and losses will be included in earnings (Boyd, 2020). Again, available for sale securities will have the investment account reflecting fair value. The changes in value will go into another account called Other Comprehensive income. The available for sale securities are sold pretty often and are similar to the trading securities in many ways. When an unrealized gain or loss is calculated because of market changes, the investment account will decrease, and the gain or loss will not be on the income statement because they have not occurred yet. The balance sheet will display the investment in the comprehensive income section (My Accounting Course, 2019).

A held-to-maturity investment is defined as a nonderivative financial asset that has been corrected or determinable payments and a fixed maturity. An entity has the capability and the intent to hold to maturity (Accounting Tools, 2020). Financial assets that the company chooses as being at fair value through profit and loss or as loans or receivables, common stock and preferred stock, since they have no maturity dates, are not included in the held-to-maturity investment category. Common held-to-maturity investments are usually other debt securities such as a bond (Accounting Tools, 2020). A held-to-maturity security is one that is not determined until the end date or mature date. There is no point in valuing until it has been bought or paid by the company that intends to hold until it has matured. The unrealized gains and losses are not included in the earnings but are reported in a separate column of the shareholders’ equity section.

There are arguments where some believe that the only proper way to handle marketable securities is by their current value, while others believe that those treatments might allow companies to manage earnings. Marketable securities are liquid investments that are listed on a stock exchange market and can be readily converted into cash since there are numerous amounts of buyers and sellers in the market. Most of these securities mature in twelve months and are treated as current value. Marketable securities are found in the balance sheet under the current assets’ accounts. Companies have the ability to value these securities under the current value so that they can manage their earnings. Marketable securities are sold easily and will help a company to the varying market of the company.

Trading securities, available for sale securities, and held-to-maturity securities are all investment options for a company or person with their own way of accounting. Trading securities will be used as a short-term profit and can be found on the balance sheet with the fair value amount. Available for sale securities will be sold in the near future. These securities will also be accounted for as fair value but will be found in the balance sheet under uncomprehensive income. Held-to-maturity securities are those that are held on to until they have reached their mature date. Then they can be sold at fair value and found in the share holders’ equity section in the financial reports. A marketable security is a liquid investment that is listed on the stock exchange market and passed between buyers and sellers at a constant rate. Because of the fact that they are mature after twelve months the argument of being accounted for at current value is acceptable. The argument of the company using these securities as a way to manage earnings is also accurate because they can sell these securities so easily. When it comes to accounting, there are always going to be different opinions and ways of doing things, but no one is neither correct or incorrect as long as their bottom number is calculated to the same result.  


Accounting Tools(2020). Retrieved from 

Boyd, K. W. (2020). CPA Accounting Institute for Success. Retrieved from 

CFI(2020). Retrieved from 

My Accounting Course(2019). Retrieved from 

Want latest solution of this assignment

Submit Your Assignment Here

AssignmentHippo Features

On Time Delivery

Our motto is deliver assignment on Time. Our Expert writers deliver quality assignments to the students.

Plagiarism Free Work

Get reliable and unique assignments by using our 100% plagiarism-free.

24 X 7 Live Help

Get connected 24*7 with our Live Chat support executives to receive instant solutions for your assignment.

Services For All Subjects

Get Help with all the subjects like: Programming, Accounting, Finance, Engineering, Law and Marketing.

Best Price Guarantee

Get premium service at a pocket-friendly rate at AssignmentHippo


  • Assignment Writing Guide
  • Essay Writing Guide
  • Dissertation Writing Guide
  • Research Paper Writing Guide


  • Accounts
  • Computer Science
  • Economics
  • Engineering

Client Review

I was struggling so hard to complete my marketing assignment on brand development when I decided to finally reach to the experts of this portal. They certainly deliver perfect consistency and the desired format. The content prepared by the experts of this platform was simply amazing. I definitely owe my grades to them.

Tap to Chat
Get instant assignment help