A company reports the marketable securities it owns in its financial statements. Exactly how the company classifies and records these investments depends on how long the company intends to hold onto them: Marketable securities can be classified as:
The manner in which the company reports the changes in the market price of these securities varies, but it affects several parts of the financial statements.
The balance sheet lists the marketable securities as an asset. Usually, the securities are stated at fair market value as of the date of the financial statements. Held to maturity, securities may be listed at cost, but this has become fairly uncommon.
Statement of Stockholders' Equity
If the securities are classified as available for sale, the statement of stockholders' equity should show the changes in fair market value of the investments as a separate component of stockholders' equity.
Statement of Cash Flows
The statement of cash flows may show the changes in fair market value of the investments as a reconciling item in the operating section of the statement. The investing section of the statement always shows the cash used to purchase securities or the cash received from the sale of securities.
Disclosures to the financial statements describe how the marketable securities have been classified. They also provide further detail as to what kinds of securities are owned by the company and what transactions may have taken place during the fiscal year.