weimingosi

equity item.

 

 

key things in OCI(some refer it as Accumulated OCI) that we need to understand. based on US GAAP.

 

1. record the change of fair value of available-for-sale securities. At the end of the term or contract of that certain securty, re-classify the accumulated gain or loss in OCI to income statement.

 

2. foreign exchange gain or loss. Re-classification is similar to the previous one.

 

I think these 2 are most important to know about OCI, if we want to do this part good in CFA exam.

 

Some more to know:

 

But on April 2, 2009, FASB made some eased changes on mark-to-market accounting. I did not look at these changes very carefully. But one thing I'm sure that under this new rule, firms can choose not to use mark-to-market accounting for available-for-sale securities which means that this part of OCI may not exist sometimes. This new accounting treatment can only be adopted under certain market situation where the market for the security is not active or the valuation scheme is not effective. This is huge change which can help banks hide a lot of credit losses and can slow the spread of fear on the market down.  But I don't think CFA would consider this in June exam.