 Hello and welcome to the session in which we will discuss the transfer between investment categories for that securities What are the categories for that security? So you need to know a little bit of background before we dive into this transfer between different categories of that securities One we have a category called held to maturity and These cad indeed under these categories we report the investment at amortized cost simply put we ignore fair value fluctuation and And we do have two other categories one is called trading and One is called available for sale for trading and available for sale We report the debt investment using the fair value Now what does it mean? Transfaring between categories simply put the company change change their mind the management change their intent They wanted an investment to be held to maturity now. They want to transfer it to available for sale It was available for sale. They want to transfer it to trading. It was trading. They want to transfer it to available for sale This is what we mean by transfer between different categories So before we before you start you want to make sure HTM is reported at cost fair value is used for trading and available for sale securities once you know this much then you are ready to discuss the Situation where we transfer one from one category to the other now on this slide I have few abbreviation when I say FV means fair value HTM held to maturity TS trading securities AFS available for sale GL gain and loss AOC I is accumulated other comprehensive income. So I'm gonna start with easy Illustration or I believe easy or simple illustration then we follow and here's what I'm gonna do I'm gonna have I'm gonna try to simplify this as much as possible. I'm gonna have three column from To from which category transfer him to which category and here's what I'm gonna tell you The accounting it's gonna follow the category being transfer to so once it's gets transferred to this category The accounting in this category will take place. Let me start with some simple Categories then will will will proceed further. Let's assume we're transferring an investment at that investment From health to maturity health to maturity is reported at amortized cost and we're gonna transfer this category to available for sale Well, what does that mean? So we're going going from amortized cost to available for sale available for sale is reported at fair value Well, what do we have to do? Well, we have to start an available for sale account And we have to report the investment now at fair value and as a result since it's reported at fair value Remember fair value means you have to record any Unrealized holding gain or loss, but we have to know if it's available for sale unrealized holding gain or loss goes into a OCI it sits on the Balance sheet. That's what we need to know. So simply put once it's transferred to available for sale We recognize it's reported at fair value We recognize unrealized holding gain and loss and that unrealized holding gain and loss is reported in OCI Let's work another example. Let's assume we have an HTM Investment at that investment and we're gonna transfer it now to Trading securities trading again trading is reported at fair value. Just like available for sale What do we have to do? We will start a trading security account and we report the investment at fair value Just like when we reported it for available for sale What's the difference? Well, the difference is we record any unrealized holding gain or loss In net income. Why? Well, we know that once an investment is categorized as trading security Once at that investment is categorized as trading security It's reported at fair value and the fair value adjustment any unrealized holding gain or loss Is reported at net income. So once we transfer it to this category We have to report it at how much it's worth the day It could be higher than an amortized cost or lower if it's higher we have an unrealized gain If it's lower we have an unrealized loss and we book that gain or loss unrealized gain or loss in net income Before we proceed any further I would like to remind you whether you are an accounting student or a CPA candidate to take Look at my website farhatlectures.com. If you're studying for your CPA exam, I don't replace this If you're studying for your accounting courses, I'll be happy to be an assistant to that process My motto is saving CPA candidate an accounting student one at a time How by providing you with resources lectures multiple choice true false that's going to illustrate and reinforce the concept This is a partial list of all my accounting courses My CPA review material is aligned with your becker, wiley, roger and gleam So it's very easy to go back and forth between my material and your CPA review course because I have I have everything aligned I provide you access to 1500 additional AI CPA Questions original AI CPA questions with their original format And with detailed solution So if you're studying for the CPA exam, you really don't want to miss those questions If you have not connected with me on linkedin, please do so take a look at my linkedin recommendation Like this recording on youtube share it with other connect with me on instagram facebook especially on instagram I'm trying to grow my following twitter and reddit now We're gonna go from available for sale, which is reported at fair value to trading which is also reported at fair value What do we have to do? Well When we transfer it if we have to make any any adjustment Any adjustment any gain or loss That was an oci because when it was available for sale any gain or loss was an oci We're going to take it out of oci and it's going to hit the income statement So simply put we're going to take it out of oci And let it go to the income statement and get done with it Let's assume we're transferring from available for sale to Held to maturity held to maturity to htm So we're going from fair value to cost Well, the first thing we have to do is we have to start an htm account because now we're going to record that at the htm account Will be at fair value now. We're going to have remember if it was in fair value available for sale We're going to have gains and losses sitting in o a oci What are we going to do with this unrealized holding gain or loss? We're going to take this unrealized holding gain or loss Whether it's a loss or a gain and we're going to split it amortize it Spread it over the remaining life of the debt over the over the remaining life of the asset and this is what we do with this therefore it It will be amortized in small chunks. It doesn't hit the income statement all at once At the end of this recording I'm going to remind you that what you should do is go to my website farhat lectures outcome Look at additional multiple choice questions. Look at additional resources to reinforce this concept Investment Transferring between categories is an important topic whether you're an accounting student or a CPA candidate Don't shortchange yourself invest in yourself. Your accounting career is important. Good luck study hard and of course stay safe