OCI Flashcards
In year 1, a company reported in other comprehensive income(OCI) an unrealized holding loss on an investment in available-for-sale debt securities. During year 2, these securities were sold at a loss equal to the unrealized loss previously recognized. The reclassification adjustment should include which of the following?
This is the difference in an unrealized loss and a realized loss. In year 1, the investment went down in value so the loss was ‘unrealized’, and is recorded in other comprehensive income (OCI) by debiting OCI. Then, when the investment was actually sold, at the same lower amount, that means the loss is now ‘realized’, and the previous debit to OCI is credited – to take it out- and the loss will be recognized in current income for the period.
