Trading, AFS, or HTM: Where Does the Unrealized Gain Go?
Classification determines whether market-value changes hit net income, OCI, or generally stay outside fair-value remeasurement.
Trading debt securities
Measured at fair value, with unrealized holding gains and losses generally affecting net income.
Available-for-sale debt securities
Measured at fair value, with applicable noncredit unrealized holding gains and losses generally flowing through other comprehensive income.
Held-to-maturity debt securities
Generally measured at amortized cost when the entity has the required intent and ability to hold the investment to maturity.
Do not confuse debt and equity
Equity securities follow different accounting rules, so avoid using old investment-category shortcuts blindly.
Exam shortcut
Trading → NI. AFS debt → OCI for applicable unrealized changes. HTM → amortized cost.
The takeaway
Classification determines where unrealized market changes are reported.
Related Summit guides
FAQ
Does HTM use fair value on the balance sheet?
Generally it uses amortized cost.
Do ordinary AFS unrealized gains enter net income immediately?
Generally no.
Does CECL interact with debt securities?
Yes, with treatment depending on classification.