Question

Which unrealized gain affects a company's earnings per share? A. Unrealized gain on trading and AFS debt securities B. Unrealized gain on AFS debt securities C. Unrealized gain on HTM securities D. Unrealized gain on trading debt securities

Answer 1

Answer:

C

Explanation:

Securities classified as HTM( held to maturity) are recorded on their fair values in company's balance sheets and their profit/ losses are posted in income statement effecting earning per share of the company.

Whereas in case of AFS (available for sale) securities are reported at fair values and their unrealized gains/losses are excluded in earnings reporting i.e income statement rather they are part of comprehensive income part of income statement