Burton Howard, CFA, is an equity analyst with Maplewood Securities. Howard is preparing a research report on Confabulated Materials, SA, a publicly traded company based in France that complies with IFRS. As part of his analysis, Howard has assembled data gathered from the financial statement footnotes of Confabulated’s 2008 annual report and from discussions with company management. Howard is concerned about the effect of this information on Confabulated’s future earnings.

Information about Confabulated’s investment portfolio for the years ended 31 December 2007 and 2008 is presented in Exhibit 15-11. As part of his research, Howard is considering the possible effect on reported income of Confabulated’s accounting classification for fixed income investments.

EXHIBIT 15-11 Confabulated’s Investment Portfolio ( thousands)

Characteristic

Bugle AG

Cathay Corp,

Dumas SA

Classification

Available for-sale

Held-to-maturity

Held-to-maturity

Cost

25,000

40,000

50,000

Market value,

29,000

38,000

54,000

31 December 2007

Market value.

28,000

37,000

55,000

31 December 2008

In addition, Confabulated’s financial reports discuss a transaction under which receivables were factored through an SPE for Confabulated’s benefit.

The balance sheet carrying value of Confabulated’s investment portfolio (in thousands) at 31 December 2008 would have been higher if which of the securities had been reclassified as a held-for-trading security?

a. Bugle.

b. Cathay.

c. Dumas.