Why this is mistaken
The word "unrealized" does not determine whether a fair-value change enters OCI. A trading debt security is measured at fair value with its fair-value change in earnings. Interest revenue and discount or premium amortization also remain separate earnings effects.
A diagnostic prompt gives updated amortized cost of $488,550.73 and fair value of $490,000. A learner who records the $1,449.27 gain in OCI is using a label instead of the classification rule. Correct it by placing the gain in earnings and retaining the effective-interest row. Then ask the learner to contrast the same facts with an AFS classification, where the applicable noncredit change can enter OCI.
Where to watch
When this mistake may appear
- The security remains unsold at period end.
Check your work
Your work may contain this mistake if:
- Use unrealized as a synonym for OCI.