New Accounting Rules for Investments Hit Banks' Bottom Lines

Document Type


Publication Date


Publication Title

The Practical Accountant




Statement of Financial Accounting Standards (SFAS) 115 requires entities to adopt market value accounting procedures for certain investments in debt and equity securities. Debt and equity securities are to be classified into one of 3 categories: held to maturity, trading, and available for sale. Debt securities for which the entity has the positive intent and ability to hold to maturity are identified as securities held to maturity. SFAS 115 requires that the entity report securities held to maturity on its balance sheet at their amortized costs. Special disclosures required by banks for each period covered by an income statement include: 1. the proceeds from sales of securitites available for sale and any gross realized gains and losses, 2. the basis on which cost was determined in computing realized gains and losses, and 3. the change in net unrealized holding gain or loss on trading securities that has been included in earnings during the period. SFAS is effective for fiscal years beginning after December 15, 1993.