CFA Level 1: Available-for-Sale Securities | Test Prep

Available-for-Sale Securities

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Question

Which of the following is/are true about available-for-sale securities?

I. They are current assets.

II. They are reported at fair market value.

III. Changes in their reported value are allocated directly to retained earnings.

Answers

Explanations

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A. B. C. D.

D

Marketable securities classified as "Available-for-sale" are financial securities which management does not intend to hold to maturity and may or may not sell in the near future. They may be categorized as either current or non-current assets, depending on the management's projected horizon over which they will be sold.

They are reported on the balance sheet at the fair market value and changes in their values are reported as a separate component of shareholder equity.