The equity method of accounting reflects the economic reality of an investment transaction. By recording changes in the value of the investee business in an investment account the investor recognizes the significant influence it has over the operations of the investee.
Available for sale securities are marketable securities which are not classified as trading securities or held to maturity securities. Unrealized gains and losses are recorded as other comprehensive income, a separate section of shareholders equity.
Last modified September 15th, 2019 by Michael Brown
Trading securities are a form of short-term marketable security which a business purchases with the intention of selling at a profit in the near future. Gains and losses are dealt with through the income statement of the business.