Why this is mistaken
A sale result begins with the sold units' controlled carrying layers at the sale date. Original cost may have changed through effective-interest amortization, credit allowances, fair-value adjustments, or other recognized amounts. An AFS sale can also require release or reclassification of accumulated OCI under current guidance.
To diagnose the error, give a previously remeasured security and ask for the sale entry. A response that subtracts acquisition cost from proceeds without updating the asset or removing related layers is incomplete. Correct it by identifying the units sold, updating them through the sale date, removing the asset and related accounts once, and reconciling proceeds. This prevents a prior gain or loss from being recognized a second time.
When this mistake may appear
- A previously remeasured security is sold.
Your work may contain this mistake if:
- Use acquisition cost without updating or releasing valuation layers.