An available-for-sale (AFS) security is a type of financial investment classified on a company’s balance sheet as a debt or equity security that is not classified as a trading security or held-to-maturity security. AFS securities are considered investments that are not intended for active trading and are not held until maturity but are rather held for other strategic reasons.

Here are some key characteristics and features of available-for-sale securities:

1. **Classification:** AFS securities are classified as a separate category on the balance sheet, differentiating them from trading securities and held-to-maturity securities.

2. **Valuation:** Unlike trading securities, which are valued at fair market value with changes in value recorded in the income statement, AFS securities are typically recorded at fair value with unrealized gains or losses reported as a separate component of equity, not affecting net income.

3. **Intent to Hold:** While not intended for active trading, AFS securities are not held until maturity, distinguishing them from held-to-maturity securities. The decision to sell AFS securities may depend on various factors, including changes in market conditions or the issuer’s financial health.

4. **Interest and Dividend Income:** Interest and dividend income from AFS securities is generally recognized in the income statement, similar to held-to-maturity securities. However, changes in fair value are not immediately reflected in net income.

5. **Reporting Changes in Fair Value:** Unrealized gains or losses on AFS securities are reported as a separate component of shareholders’ equity until the securities are sold or until there is an other-than-temporary impairment.

6. **Disclosure:** Companies are required to disclose information about the fair value of AFS securities and the nature of any restrictions on the ability to sell these securities.

Examples of available-for-sale securities include certain stocks and bonds that a company holds as part of its investment portfolio but does not plan to actively trade or hold until maturity. The classification of securities (available-for-sale, held-to-maturity, or trading) has accounting and financial reporting implications, and companies must adhere to relevant accounting standards, such as those provided by the Financial Accounting Standards Board (FASB) in the United States.