2251 Flashcards
2251.19
Available-for-sale (AFS) securities are carried on the balance sheet at fair value.
Unrealized gains and losses from changes in fair value are reported in Other Comprehensive Income (OCI) for the period. OCI is then added to (subtracted from) Accumulated Other Comprehensive Income (AOCI), which is shown as a separate component of stockholders’ equity until realized.
Unrealized gains or losses from sold securities are adjusted when the entire portfolio is evaluated for fair value at year-end, not on the date of sale.
Under FASB ASC 326, when the fair value of an AFS debt security is below its amortized cost and the decline in fair value below amortized cost is attributable to credit-related factors, an estimate of expected credit losses must be established. To recognize the credit-related loss, the company does not adjust the cost of the security or recognize the decline in OCI. Instead, the company recognizes the credit loss in earnings and subsequently increases an allowance for credit losses on the balance sheet. The loss can be reversed, and the related allowance can be reduced in subsequent periods if the expected loss decreases or conditions change.
