Why this is mistaken
Current Topic 321 accounting generally sends the fair-value change on an in-scope ordinary equity security to earnings. The fact that the shares remain unsold does not move that change to OCI. The former AFS equity model can make older examples misleading.
Give a learner listed shares that cost $240,000 and have a $272,000 period-end fair value. Recording the $32,000 gain in OCI shows the historical carryover error. Correct it by recording the gain in earnings and the asset at $272,000. If the shares also pay a $6,000 dividend, keep dividend income separate. Scope, equity-method eligibility, and the validity of the market price still require their own evidence.
Where to watch
When this mistake may appear
- Listed shares remain unsold at period end.
Check your work
Your work may contain this mistake if:
- Route the fair-value change to OCI solely because it is unrealized.