Account for ordinary equity securities

Linden Peak's listed shares and private shares are both ownership interests, but that fact does not give them the same evidence path. First confirm that neither belongs in consolidation or the equity method and that Topic 321 scope is supplied.

Listed shares: fair value through earnings

For the controlled listed holding, acquisition cost is $240,000, period-end fair value is $272,000, and cash dividends are $6,000. The $32,000 fair-value gain and $6,000 dividend income are separate earnings effects. Current ordinary equity-security accounting does not send the fair-value gain to OCI merely because the shares remain unsold.

Private shares: a bounded election

The measurement alternative requires qualifying equity securities without a readily determinable fair value and an entity election. It does not freeze the asset at cost. The workpaper still processes supported impairment and observable price changes from qualifying same-issuer transactions.

In the example, $180,000 cost plus a supplied $25,000 observable adjustment less a supplied $10,000 impairment produces $195,000 carrying amount. Before using those amounts, the evidence owner must document why the observed transaction concerns the same issuer, why the security is comparable after rights and preferences, and why the impairment conclusion is supported.

Avoid historical carryover

Older materials may present AFS equity securities and OCI. Use historical architecture to understand change, but research and apply current Topic 321. Do not blend a former category with current measurements.

Exit check

For each ordinary equity holding, state scope, readily-determinable-fair-value conclusion, election if any, market or transaction evidence, impairment review, dividends, earnings effects, and ending amount. Carry that security-level card into the influence analysis next; the next lesson tests whether a different ownership interest leaves Topic 321 for the equity method.