Question: Keys Inc compared the cost of its marketable securities to
Keys, Inc., compared the cost of its marketable securities to their market value at the end of 2010. This comparison follows:
Management would like to classify these securities as available- for- sale and, therefore, report the unrealized loss on the statement of shareholders’ equity rather than the income statement. How should the auditor decide if the securities are “trading” or “available- for- sale”? What are the advantages and disadvantages of reporting unrealized losses on the statement of shareholders’ equity rather than the in-come statement? How will the various stakeholders be affected by this decision?
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