Your Ask Joey ™ Answer

How are changes in fair value for equity securities recorded on the income statement?

Treatment varies depending on whether its classified as “trading” or “available-for-sale”. Additionally, you must determine whether the decline in fair value is temporary or other than temporary (i.e. permanent). Remember, to determine whether or not significant influence exists.

For trading securities, unrealized and realized losses are recorded in the income statement.

For available-for-sale securities, assuming change in fair value is temporary, then unrealized gains or losses recorded to OCI, which is part of stockholders’ equity on the balance sheet. Any realized gains or losses for AFS securities are recorded in the income statement.

Back To All Questions

You might also be interested in...