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As discussed in ASC 320-10-25, the classification of debt investment securities as trading, available-for-sale (AFS), or held-to-maturity (HTM) determines the subsequent recognition and measurement of such investments. Figure FSP 9-1 summarizes the presentation of debt investments within the scope of ASC 320. See PwC's Loans and investments guide for further discussion.
Figure FSP 9-1
Balance sheet and income statement presentation of debt securities
Classification of debt security
Valuation
Treatment of unrealized gain/loss
Other income statement effects
Trading
Fair value
Recognized in net income
Interest and dividends as earned
Held-to-maturity
Amortized cost basis
Not recognized
Interest as earned

Credit component of other-than-temporary impairment losses through income and remainder in OCI

Gains and losses from sale
Available-for-sale
Fair value
Recognized in AOCI as a separate component of stockholders’ equity
Interest as earned

Credit component of other-than-temporary impairment losses through income and remainder in OCI

Gains and losses from sale
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Equity securities are generally measured at fair value or using the elective methodology prescribed in ASC 321-10-35-2 for equity securities without readily determinable fair values. This methodology is also referred to as the measurement alternative. The measurement alternative may not be elected by entities that follow specialized accounting models (as described in FSP 9.2), or for investments that qualify for measurement under the net asset value (NAV) practical expedient in ASC 820, Fair value measurement.
Figure FSP 9-2 summarizes the presentation of equity securities within the scope of ASC 321. See LI 2 for further discussion.
Figure FSP 9-2
Balance sheet and income statement presentation of equity securities
Measurement of equity security
Valuation
Treatment of unrealized gain/loss
Other income statement effects
Equity securities with readily determinable fair value
Fair value
Recognized in net income
Dividends as earned
Equity securities without readily determinable fair value
Fair value / NAV / measurement alternative
Recognized in net income
Dividends as earned

Gains and losses from sale

Impairment loss (if applicable) 2
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1 Investments in certain funds qualify for the use of the NAV practical expedient instead of fair value. See FV 6.2.6.2
2 When a reporting entity elects the measurement alternative in ASC 321, the equity interest is recorded at cost less impairment. The carrying amount is subsequently increased or decreased for observable price changes (i.e., prices in orderly transactions for the identical investment or similar investment of the same issuer). Any adjustments to the carrying amount are recorded in net income. In addition, the investment is written down to fair value through earnings if the required qualitative assessment indicates impairment.
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