Diff between trading and available for sale securities

CFA Level I FRA
#1

Dear All- what is the main difference between trading (TS) and available for sale (AFS) securities? TS are meant to be sold in near future to make profit. Can AFS sold even at a loss? How near is the near term for TS? what is the time frame for selling AFS?

Thanks in advance

#2

There is no general rule for the time frame on near-term versus long-term; deciding what constitutes near-term is up to the individual corporation.

Both trading securities and available-for-sale securities can be sold at a gain or at a loss; it depends on the market.

#3

Agreed with S2000magician. Let’s just add than most banks (which is where the split into held for trading and available for sale is really crucial) would define near term as up to 3 months. So, 3 months is a well-grounded industry consensus, used for classificaton purposes to identify trading securities. However, this is NOT incorporated into the standards.

#4

Thanks a lot to both of you

#5

Thanks, Wojtek; I’ll bear that in mind.

#6

My pleasure.

#7

Both of you are welcome :slight_smile: