U said in the video that because of the securities not sold thus gain should go to OCI. Then why it goes to income statement i.e. to net income where the securities are trading and these are also not sold as same in the AFS case ???? I learn much from ur videos!!!
Wouldn't the $840 be unrealized gains and losses? I do understand the effect on the Balance Sheet in shareholder's equity (accumulated other comprehensive income) but thought the correct contra account would be Net unrealized holding gains / losses. ??? Thank you in advance. I enjoy your videos.
Sure, you could also call it that. The way I learned was use the account "Fair Value Adjustment-- AFS Securities" but as long as you're marking the asset to its market value we're getting to the same place. Sometimes I wish the FASB would create standard names for all the accounts! Thanks for raising a great question.
@Edspira I understand Amortized Cost calculation from "How to amortized a bond discount" video of yours. But i cannot understand how Fair Value is calculated. Where can I find that video of yours.? If somebody know, please help me.
IS it OK if on year 22 since the fair value is the same as amortised cost, we debit OCI of 1309 previously recognised gain and credit fair value adjustment of 1309 to cancel the previous unrealised gain., so that fair value adjustment has a zero balance since fair value on year 22 is the same as amortised cost? Thanks in advance
How did you calculate fair value of the bond at each date? is that the market price quoted and you arbitrarily put in figures or is there some calculation?
+Ibrahim Babayev if the fair value of that bond is just the present value of future cash inflows why is it the case that fair value and amortized cost are different figures?
+Ashish Sharma That depends on whether the firm had previously made an election to mark the AFS security to market. Generally speaking, you recognize any realized gain or loss and credit the asset account to get the AFS security off the books
I’m figuring out how to record journal entries for bonds before I’ve even started trading bonds lol
U said in the video that because of the securities not sold thus gain should go to OCI. Then why it goes to income statement i.e. to net income where the securities are trading and these are also not sold as same in the AFS case ????
I learn much from ur videos!!!
Wouldn't the $840 be unrealized gains and losses? I do understand the effect on the Balance Sheet in shareholder's equity (accumulated other comprehensive income) but thought the correct contra account would be Net unrealized holding gains / losses. ???
Thank you in advance. I enjoy your videos.
Sure, you could also call it that. The way I learned was use the account "Fair Value Adjustment-- AFS Securities" but as long as you're marking the asset to its market value we're getting to the same place. Sometimes I wish the FASB would create standard names for all the accounts! Thanks for raising a great question.
@Edspira
I understand Amortized Cost calculation from "How to amortized a bond discount" video of yours.
But i cannot understand how Fair Value is calculated.
Where can I find that video of yours.?
If somebody know, please help me.
IS it OK if on year 22 since the fair value is the same as amortised cost, we debit OCI of 1309 previously recognised gain and credit fair value adjustment of 1309 to cancel the previous unrealised gain., so that fair value adjustment has a zero balance since fair value on year 22 is the same as amortised cost? Thanks in advance
How did you calculate fair value of the bond at each date? is that the market price quoted and you arbitrarily put in figures or is there some calculation?
+Ibrahim Babayev if the fair value of that bond is just the present value of future cash inflows why is it the case that fair value and amortized cost are different figures?
Hi, what happens when we sell an AFS security? And is apportion related to this in any way ? .........sorry need some urgent assistance !!!
+Ashish Sharma That depends on whether the firm had previously made an election to mark the AFS security to market. Generally speaking, you recognize any realized gain or loss and credit the asset account to get the AFS security off the books
how would I adjust the fair value adjustment next year if I had another gain on the AFS securitues?
Same doubt
Thanks so much