Held-For-Trading Security

A held-for-trading security is a security that a company intends to sell in the near future. These securities are not intended to be held for long-term investment. The company must have the intent to sell the security within one year of its purchase.

Held-for-trading securities are reported at fair value on the balance sheet. Fair value is the price that the security could be sold for in the open market. The company must make an adjustment to the carrying value of the security if its fair value changes.

The company must also report the unrealized gains and losses on held-for-trading securities in the income statement. Unrealized gains are increases in the fair value of the security that have not yet been realized through a sale. Unrealized losses are decreases in the fair value of the security that have not yet been realized through a sale.

The treatment of held-for-trading securities is different from the treatment of other types of investments, such as held-to-maturity securities and available-for-sale securities. Held-to-maturity securities are securities that a company intends to hold until maturity. These securities are not reported at fair value on the balance sheet. Instead, they are reported at their amortized cost. Available-for-sale securities are securities that a company does not intend to sell in the near future, but does not intend to hold until maturity. These securities are reported at fair value on the balance sheet. However, the unrealized gains and losses on available-for-sale securities are not reported in the income statement. Instead, they are reported in a separate component of shareholders' equity.

The different treatment of held-for-trading securities is based on the different purposes of these securities. Held-for-trading securities are intended to be sold in the near future. Therefore, it is important to report their fair value on the balance sheet so that investors can see the current value of these investments. The unrealized gains and losses on held-for-trading securities are also reported in the income statement so that investors can see the impact of these changes on the company's earnings.