FASB standards require all investments in securities to be reported in the balance sheet at fair value. However the unrealized gains and losses on securities that are not part of an actively traded portfolio (so called "available for sale" securities) are reported as "other comprehensive income". Other comprehensive income may be shown only in a footnote and is not included in the EPS calculations that every publicly traded company must report.
What is your opinion about the exclusion of unrealized gains and losses on available for sale securities from net income.
The solution explains the current GAAP rules and presents four reasons with explanations as to why the writer agrees with the treatment of unrealized gains and losses. In the solution is a 'real world' example of what would have resulted if Google stock has been bought and classified as available for sale under other rules.