Section 2: 30–40%2E1

Financial Assets at Fair Value

Exam insight

Telling AFS from trading is the classification question you'll see most here. Trading securities run unrealized gains and losses through net income; AFS runs them through OCI. A frequent setup describes a company 'intending to sell within 3 months' and asks how to classify it, which is trading, not AFS. Also know that transfers between categories trigger immediate recognition.

What AICPA wants you to know

1Classify debt securities as trading or available-for-sale and apply correct accounting
2Explain how ASU 2016-01 changed the accounting for equity securities
3Record purchase, fair value adjustments, and sale of trading and AFS securities
4Distinguish unrealized gains/losses from realized gains/losses
5Apply reclassification adjustments when AFS securities are sold

Patterns in this topic

The exam re-skins the same archetypes. Recognize these here, then drill them in the Pattern Lab.

The Security BucketClassification picks the measurement: trading through net income, AFS debt through OCI, HTM at amortized cost, and all equity through net income.

Exam tip

Study smarter: before you expand each card, cover the screen and try to recall what the concept means from its title alone. Retrieving it from memory builds the recall the exam actually tests, and it beats re-reading.