If a bond held as FVOCI increases in market value and is not sold, where is the gain reflected?

If a bond held as FVOCI increases in market value and is not sold, where is the gain reflected?

• A. Fair value through other comprehensive income (FVOCI)
• B. Profit and Loss (P&L)
• C. OCI
• D. Equity reserves unrelated to OCI

Answer: (A)

When a bond is measured at fair value through other comprehensive income, any unrealized changes in its value flow into OCI, a component of equity. So if the bond’s market value increases and you haven’t sold it, the gain sits in the OCI reserve associated with FVOCI. The asset value on the balance sheet reflects the new fair value, but the profit and loss statement remains unaffected until disposal. If the instrument were instead measured at the alternative basis (FVTPL), the fair value changes would hit P&L.

When a bond is measured at fair value through other comprehensive income, any unrealized changes in its value flow into OCI, a component of equity. So if the bond’s market value increases and you haven’t sold it, the gain sits in the OCI reserve associated with FVOCI. The asset value on the balance sheet reflects the new fair value, but the profit and loss statement remains unaffected until disposal. If the instrument were instead measured at the alternative basis (FVTPL), the fair value changes would hit P&L.