A security sale removes the sold interest at the sale date and compares the proceeds with the carrying layers that apply to that interest. Original cost is only one historical input. It is not a universal sale basis.
Close the sold units once
Identify the units sold and update them through the sale date. Reconcile cash interest, effective-interest amortization, credit allowance, fair-value adjustment, and accumulated OCI as applicable. Then record proceeds and remove the related asset layers. ASC 320-10-40-1 points to Topic 860 for the sale determination. Establish legal form and derecognition scope before calculating the gain or loss. ASC 321-10-40-1 also directs an entity to the applicable derecognition guidance for an equity security.
For example, assume sold AFS units have a $100,000 amortized-cost allocation, a $2,000 allowance, and a fair-value carrying amount of $95,000 immediately before sale. A proceeds-minus-original-cost shortcut would ignore the recorded layers. The close must remove the exact sold portion and process any required OCI reclassification under current guidance.
Prevent double counting
A fair-value change may already have affected earnings or OCI before sale. Do not recognize it again merely because the asset is now sold. Tie the trade confirmation, settlement, unit-level basis method, sale-date valuation, ledger entry, allowance release, and accumulated-OCI record. A realized label describes the sale result; it does not replace that reconciliation.
Put the concept to work
Analyze this concept
- At a supplied sale date, update measurement, remove the sold security's applicable layers, reconcile proceeds, and identify any required AOCI reclassification without double counting.
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Build on these ideas
- Debt-security fair-value adjustment — Analyze
To analyze this concept: Required. Sale accounting begins with controlled carrying layers at the sale date.