Section 2: 30–40%2E2

Financial Assets at Amortized Cost

Exam insight

HTM seems easy until you get a discount bond and have to find its year 3 carrying value. You use the effective interest method, and amortizing a discount pushes the carrying value up each year. What people forget is that the carrying value moves every period, up for discount bonds, down for premium bonds. Know the direction and the formula, or you'll compute the wrong number.

What AICPA wants you to know

1Apply the intent-and-ability test for HTM classification
2Amortize bond premium/discount using the effective interest method
3Understand the 'tainting' rule when HTM securities are sold
4Apply CECL-based credit loss allowances to HTM debt securities

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.The Bond MathCash follows the coupon on face; expense follows the market rate on carrying value; the difference amortizes toward face.

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.