respond to this post. Will classifying the portfolio as each proposes actually have the effect on earnings that each says it will? Held-to-maturity is debt securities that the company has the positive intent and ability to hold to maturity. Companies often use held-to-maturity securities to earn spread net income on the difference between the collection of interest revenue on the debt security and payment of interest expense on borrowed funds, to diversify their portfolio of investments by making low-risk investments, or to eliminate the volatility in either reported earnings or reported capital. For this scenario, yes, I believe classifying the portfolio will have effects on the stated earnings. That said, Beresford classified securities that have increased in value during the period as trading securities in order to increase the net income. By doing so he is able to classify the securities with unrealized gains as trading securities that would ensure the gains are recorded in the net income, increasing the net income for the year. In terms of classifying the securities that have decreased in value as held-to-maturity, the losses would remain unrealized, which would prevent the unrealized losses from decreasing the net income. Although Nielson disagrees, she is still also correct. By classifying debt securities that have decreased in value as trading securities, any unrealized losses would be taken from the income, reducing the net income. This would help smooth the