Question

Why do we not consider the fair value adjustment account on the sale of securities?

Answer 1

All the securities available for sale are subject to Fair value adjustment at the end of the year according to the market value of the securities. The in adjustment is done through debiting an increase or crediting a decrease in the fair-valuation of the security under account called "Security trading fair value adjustment". This account is a asset account in nature. As all the entries in the "Security trading fair value adjustment" account is also adjusted to the Net Income every year also, so we do not consider the account figure and do value profit or loss based on historical purchase price.

The debit or credit so provided to the account " Securities fair value adjustment" is Just an accumulation or a deficit on the fair value adjustment of the trading security. This effect has been taken care in every year's Net Income accordingly.

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