 Hello, and welcome to this session in which we would look at the transfer between investment categories. This topic is covered in intermediate accounting as well as the CPA FAR section. As always, I would like to remind you to connect with me on LinkedIn if you haven't done so. YouTube is where you would need to subscribe. I have 1,600 plus accounting, auditing, finance, and tax lectures. This is a list of all the courses that I cover, including CPA questions. If you like my lectures, please like them. Click on the like button. It doesn't cost you anything to share them. Put them in playlist. If they benefit you, it means they might benefit other people as well. And please connect with me on Instagram. On my website, farhatlectures.com, if you are looking for additional resources, CPA questions, quasi-CPA simulations, additional practice exercises, multiple choice through false, please take a look at my website for additional resources. And the first thing I'm gonna talk about is those three trading, three investment categories. The first thing I wanna let you know that I'm gonna be discussing only three categories, trading, available for sale, and held to maturity. What does that mean? It means I am not going to be discussing what's called equity to available for sale, or available for sale to equity, or equity to consolidation. Because when it comes to equity and consolidation, it's an advanced topic accounting, and I do have that topic covered in my advanced accounting. So here I'm gonna keep it for these three categories, which is trading, available for sale, and held to maturity. But real quick, let's go ahead and review what's trading. Trading is reported at fair value. It's usually considered a current asset. And interest is recognized as revenue. We have that as trading, and if we receive any interest, it's recognized as revenue. Available for sale, also, we reported at fair value. It might be current or a non-current. Whether if we receive interest or dividend from those investments, they're reported in revenue. Any unrealized holding gain or loss is reported in other comprehensive income, which is important to know this, which is the balance sheet. Held to maturities, it's reported at amortized cost. It could be current or non-current depending the life of the bond. And here we only have, obviously, we only have debt securities or bonds here, or debt, held to maturity debt. And interest is recognized in revenue. Now, what's gonna happen is this. Companies sometime may classify an investment as available for sale. They may change their mind, move it to trading or it could be trading. They could move it to available for sale. It could be held to maturity, move it up to available for sale, or it could be available for sale, move it up, move it down to maturity. Held to maturity. Now, this should not be a common event, but if it happens, it should be rare, and it should be justified. But the question is, what do we do once that happens? Okay, that's what we need to know. Also, we need to know that certain investments, they can be reported at fair value. Remember, we talked about the fair value option. If they are reported at fair value, the gains or losses are reported in the income statement. If a company chooses to use the fair value for some of their instrument, they should be reported separately from any other investments. But let's take a look at the rules. One, if the investment is going to trading from any category, what does that mean? It means we're going from available for sale to trading, and usually those are available for sale to trading, or we're going from held to maturity to trading. First of all, any transfer, any transfer, whatever that transfer between category is always reported at fair market value. So when we report this, it's always reported, the transfer gets done at fair market value. What do we need to do? If it's too trading, unrealized gain or loss reported in earnings. So we adjust the security to market and we're reported in the income statement. Why? Because it's going to trading. Trading is reported, trading activities is reported in the income statement. Now, what happened if we're going from trading to another category? Remember, in trading, when we have it in trading, everything goes into the income statement. So everything is already recognized. What does that mean? It means we have no adjustments. It's reported at fair value. Any unrealized holding gain or loss is already reported in the income statement. So it was already in trading. It's reported in the income statement. So no adjustment is necessary. What happened if we go from held to maturity to available for sale? Now, held to maturity, we report things, like debt securities, we report things at amortized cost. Amortized cost, it means there's no gain or loss. Now it's going to be available for sale. Available for sale, it gets reported at fair market value. Any unrealized holding gain or loss is reported in equity for the available for sale. Now what happened if we're going from available for sale to held to maturity? Well, available for sale was already at fair market value and now we're going to held to maturity. Available for sale, remember, the gains and losses are sitting in OCI. So we might have a gain. We might have losses. What do we have to do? Any unrealized holding gain or losses is amortized. What we're going to do, we're going to take the gain or the loss, we either have a gain or a loss and we're going to amortize it. Let's assume we have $10,000 and we have, let's make it two years to go in this investment. Well, two years, we're going to amortize either the gain or the loss, 5,000 each year because we have two years to go. If we have 10 years to go, we'll amortize 1,000 a year and this is only we have held to maturity only we could have debt securities. So this is basically a review about transferring between categories from trading to available for sale, available for sale to held to maturity, so on and so forth. If you want additional resources or if you're studying for your CPA exam, please visit farhatlectures.com. Your CPA investment is a long-term 20 to 30 year investment. Make the right investment, study hard, use your resources properly. Good luck and study hard, it's worth it.