What is the journal entry to record an unrealized gain on an available-for-sale (AFS) security?
When a company has an investment that is classified as available-for-sale, any unrealized gains or losses (i.e. temporary change in fair value) are recorded to other comprehensive income (OCI), which is part of stockholders equity on the balance sheet. There is no impact to the income statement.
When the company has an unrealized gain, the debit would be to the investment account in the asset section and the credit would be to other comprehensive income (increased equity).
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How is an unrealized loss on an available-for-sale (AFS) security recorded in the financial statements?
For investments that are classified as available-for-sale (AFS), any unrealized gains or losses are recorded to other comprehensive income (OCI). When the company has an unrealized loss, the debit would be to other comprehensive income (reduces equity) and the credit is to the investment account on the asset section of the balance sheet. There is […]
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 […]
What are available-for-sale debt securities?
Available-for-sale debt securities are neither trading securities, nor held-for-sale securities. These securities are reported as either current or noncurrent assets, depending on the company’s intent to sell in the near team. These securities will be reported at fair value. Unrealized gains or losses from available-for-sale securities will be reported in other comprehensive income (OCI).