Reclassification

CFA Level II
#1

Please comment and explain:

Suppose A decides to reclassify debt’s securities as avail for sale. Ignoring any effect on income taxes, which of the following best describes effects of neccesary adjustment:

1- NI is lower and asset turnover is higher

2- ROA is lower and Debt/Equity is lower

3-ROE is lower and Debt/Total capital is not affected.

Thanks

#2

which one is reclassification current or temporal?

#3

This is bout intercorporate investment, not translation session. No exchange rate calculation is involved

#4

B/S revalued at FV, diff goes to other compre income.

Seems like not enough info given?

#5

Answer 2. The assets will be marked to market. So ROA is reduced (assuming market prices are high). The Equity increases by unrealized gains as part of other comphrensive income. So D/E reduces.

Pls correct me.

Thanks.