Investment in equity instruments – 2014 Version, Effective Jan.

2018

Measurement of Financial Assets

Initial Measurement
At initial recognition, an entity shall measure a financial asset at its fair value plus, in the case of a financial
asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of
the financial asset.

Subsequent Measurement
After initial recognition, an entity shall measure a financial asset at
(a) amortized cost;
(b) fair value through other comprehensive income; or
(c) fair value through profit or loss

The investment is held for trading, designated as FAFVTPL or the entity did not elect to present
changes in fair value in OCI

Proforma entry to record the acquisition of investment:

FA@FVTPL xxx
Various expenses xxx
Cash xxx
#
Proforma entry to record the fair value adjustment:
FA@FVTPL xxx
Fair value adjustment gain – p&l* xxx
#
*or “unrealized gain, mark to market gain or unreliazed holding gain”

The investment is not held for trading and the entity elected to present gains and losses in OCI

Proforma entry to record the acquisition of investment:

FA@FVTPL xxx
Cash xxx
#
Proforma entry to record the fair value adjustment:
FA@FVTPL xxx
Fair value adjustment gain – OCI** xxx
#
**or “unrealized gain, mark to market gain or unreliazed holding gain”
Derecognition (Sale of investment in equity instrument)

IFRS 9 requires an entity to derecognize a financial asset when, and only when:

(a) the contractual rights to the cash flows from the financial asset expire, or

(b) it transfers the financial asset and the transfer qualifies for derecognition.

Computation of the amount to be recognized in profit or loss

Derecognition of a financial asset in its entirely

Consideration received Pxxx

Less: Carrying amount
(measured at the date of derecognition) xxx
Gain (loss) Pxxx

Derecognition of part of a financial asset

Consideration received Pxxx

Less: Allocated Carrying amount “xx/xx”
(measured at the date of derecognition) xxx
Gain (loss) Pxxx

Derecognition of a financial asset coupled with a new financial asset or financial liability

Consideration received Pxxx

New Financial Asset xxx
New Financial Liability (xxx)
Net consideration received xxx
Less: Carrying amount
(measured at the date of derecognition) xxx
Gain (loss) Pxxx

Reclassification Adjustment for Investment in FVOCI

Amounts presented in other comprehensive income shall not be subsequently transferred to profit or
loss. However, the entity may transfer the cumulative gain or loss within equity. That is, to retained
earnings.
Proforma entry to record the disposal:

The investment is held for trading, designated as FAFVTPL or the entity did not elect to present
changes in fair value in OCI
To record the sale of investment:
Cash xxx
FA@FVTPL xxx
Gain on sale – p&l xxx
#

The investment is not held for trading and the entity elected to present gains and losses in OCI

To record the fair value adjustment*:

FA@FVTOCI xxx
Fair value adjustment gain - OCI xxx
#
To record the sale of investment:
Cash xxx
FA@FVTOCI** xxx
#
To transfer accumulated OCI to retained earnings:
Fair value adjustment gain - OCI xxx
Retained Earnings xxx
#

*This journal entry should be made prior to recording the sale of the investment since subsequent changes in fair value are required to be
recognized in OCI.

**This is the carrying amount measured at the date of derecognition.

I. Entity A acquired ordinary shares of Entity B for P800,000 on 29 November 2013. The investment
represents less than 20% of the outstanding shares of Entity B. The transaction costs incurred were
P8,000.

On 31 December 2013 the fair value of the investment was P820,000 and the transaction costs that
would be incurred on sale were estimated at P12,300.

On 31 March 2014 Entity A sold the investment for its fair value of P860,000.

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.agp 2/14/17