• FAS 115 allows companies that dont intend on trading investments to make fast profits to classify these investments as Available-for-Sale (AFS). Unrealized gains and losses from AFS securities are included in Other Comprehensive Income rather than on the Income Statement. Explain whether or not you think this is transparent accounting.
• In the case, Malone is troubled by the recognition of realized gains on AFS securities during the year. He tells Jack to adjust out $4.2m of income, based on the $6.7m in gains taxed at a 37% marginal tax rate. Why do you think he feels these gains distort 2013 net income? Do you agree with him?