Debt-security fair-value adjustment

A debt-security fair-value adjustment connects updated amortized cost to the security's controlled fair value at a measurement date. It explains the accounting entry. It does not produce the valuation itself.

Calculate after effective interest

Update amortized cost before measuring the bridge. Suppose ending amortized cost is $488,550.73. A trading security with a $490,000 fair value has a $1,449.27 upward bridge, which enters earnings. An AFS security with a $470,000 fair value has an $18,550.73 downward bridge. Its supported credit and noncredit parts must be separated under the applicable guidance. An HTM security does not receive a recognized fair-value layer merely because the same market price is known.

ASC 320-10-35-1 provides the classification-based measurement rules. Topic 820 governs how fair value is measured when another Topic requires or permits it. Classification is a separate decision from the fair-value hierarchy. ASC 820-10-35-36 directs the valuation process toward observable evidence when it is relevant and available.

Retain an auditable bridge

Store the security identifier, classification, opening adjustment, current amortized cost, valuation source, measurement date, current adjustment, and reporting destination. For AFS, also retain the allowance and accumulated OCI layers. The bridge should prove that the asset and related accounts reach the required reported amount. It cannot prove that the market input, classification, or credit estimate is valid; those conclusions need their own evidence.