Section 2: 30–40%2E1
Financial Assets at Fair Value
Investment accounting changed significantly with ASU 2016-01. Equity securities now ALWAYS go through net income. Debt securities split into trading (net income) and AFS (OCI). Getting these classifications wrong will cascade errors throughout the income statement and OCI.
What AICPA Wants You to Know
- 1Classify debt securities as trading or available-for-sale and apply correct accounting
- 2Explain how ASU 2016-01 changed the accounting for equity securities
- 3Record purchase, fair value adjustments, and sale of trading and AFS securities
- 4Distinguish unrealized gains/losses from realized gains/losses
- 5Apply reclassification adjustments when AFS securities are sold