IS and BS effects of AFS and HFT - Is Stalla right?

I have an issue with how Stalla is trying to teach this subject. Apparently, if I had a security with an unrealized loss of $3500, my D/E ratio would be the same if it was classified as either as AFS of HFT. My argument is it would NOT be the same because of the tax effects. Generally speaking, the entire $3500 loss would be recorded in OCI under AFS. Under HFT, the loss would flow through the income statement but the government would absorb some of that through tax benefits. Am I supposed to assume no taxes exist when doing questions from this section?

even to the OCI it would go after tax. … PUFE is Net of tax … on the OCI.

ckp123, am I correct about PUFE (direct to equity)? I can’ remember what E stands for. P for Pension Adjustment U for Unrealized G/L (for AFS) F for Foreign translation gain/loss E – ?? Thx

E = Effective Portion of a Hedge

Thanks cp, I’m starting to get really agitated with my Passmaster results, considering all the material I’ve read. As soon as I read a SS, I forget details in another one. Go back to that one, forget details in another one. It’s a constant uphill battle.

cpk123 Wrote: ------------------------------------------------------- > E = Effective Portion of a Hedge thx ckp123.

Similar to what bpdulog was concerned, CFAI has also stated in some areas of FRA, ignore the tax effect this is the result. However, when tax effects are considered there will be slight change in ratios. For Exam purpose, what is default position ie with or without tax Will the question be clear enough to state that?