This free, guided checker walks your finance team through the key decision points for ASC 320 / ASC 321 Investment Classification. Answer a few questions to see the likely treatment and the evidence to document.
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This tool is a high-level US GAAP screening aid for general information only and is not accounting, audit or legal advice. Conclusions require entity-specific evidence and judgement - confirm the treatment with your advisor.
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Debt securities are classified under ASC 320. Passive equity securities are measured under ASC 321. Interests that are not securities, or that convey control or significant influence, follow other topics such as ASC 810, ASC 323, and ASC 310.
Apply other Codification topics such as ASC 810, ASC 323, or ASC 310.
Official guidance: FASB Accounting Standards Codification
Positive intent is a higher hurdle than the mere absence of a plan to sell. Sales or transfers out of held-to-maturity, other than the narrow circumstances in ASC 320-10-25-6, can taint the remaining held-to-maturity portfolio.
Classify as held-to-maturity and measure at amortized cost.
Official guidance: FASB Accounting Standards Codification
Trading classification reflects active and frequent buying and selling with the objective of generating short-term gains. Debt securities that are neither trading nor held-to-maturity default to available-for-sale under ASC 320-10-25-1(b).
Classify as trading and measure at fair value through net income. Classify as available-for-sale and measure at fair value through OCI.
Official guidance: FASB Accounting Standards Codification
Equity interests that convey control are consolidated under ASC 810, and interests that convey significant influence follow the equity method under ASC 323. Only passive equity securities remain within the scope of ASC 321.
Apply consolidation or the equity method rather than ASC 321.
Official guidance: FASB Accounting Standards Codification
Equity securities with readily determinable fair values are measured at fair value with changes recognized in net income. Without a readily determinable fair value, an entity may elect the measurement alternative in ASC 321-10-35-2. Investments measured at net asset value under the practical expedient follow ASC 820-10-35-59.
Measure at fair value with changes recognized in net income under ASC 321. Consider electing the ASC 321 measurement alternative.
Official guidance: FASB Accounting Standards Codification
The fair value option is an irrevocable election made instrument by instrument at initial recognition; it cannot be applied retroactively or reversed in a later period. Confirm the election was documented contemporaneously, because an unrecorded intent to carry the security at fair value does not qualify. A common trap is trying to elect the option for only part of an instrument - it must be applied to the entire eligible instrument.
Measure at fair value through net income under the ASC 825-10 fair value option; ASC 320 classification does not apply.
Official guidance: FASB Accounting Standards Codification
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