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Ap106 Investments Lecture Notes
Ap106 Investments Lecture Notes
NOTES
FOR INVESTMENT IN EQUITY SECURITIES
a) Control Exist(> 50% equity in voting shares, that is ordinary shares) –
Investment in Subsidiary
b) Significant influence exists(20 – 50% in voting shares, that is ordinary
shares) – Investment in Associate (Equity Method)
c) No control nor significant influence exist (PAS 39 or PFRS 9, effective
January 1, 2018)
i. Financial asset at fair value through profit or losses (trading
securities)
ii. Financial asset at fair value through other comprehensive income or
losses (AFS)
The investor shall measure the any retained investment in associate at fair value.
The fair value of the investment at the date it ceases to be an associate shall
be regarded as its fair value on initial recognition as a financial asset.
Financial assets at fair value (P/L or OCI) under PAS 39 were recycling is allowed)
Investment at Fair Value Investment at Fair Value
through profit or loss through OCI (Available for
(trading securities) Sale)
2.Balance sheet Fair Value Balance Sheet Fair Value Balance Sheet
valuation Date Date
(temporary changes Less: Carrying Value Less: Carrying Value
in market value) Unrealized gain/loss – P/L Unrealized gain/loss – OCI
Financial assets at fair value (P/L or OCI) under PFRS 9 were recycling is not
allowed for equity securities categorized as FA@FMV through OCI.
Investment at Fair Value Investment at Fair Value
through profit or loss through OCI
Notes:
1. If shares are acquired dividend on(between declaration and record date of
dividends), the purchase price shall be debited to dividends receivable
first before debiting the investment account for the balance.
2. Cash dividends shall be credited to dividend income upon declaration at
face value.
3. Property dividends shall be credited to dividend income at fair value on
declaration date.
4. Stock dividend shall be recorded only through memo (update carrying value
of the share.
5. Stock in lieu of cash shall be recorded as dividend income at the fair
value of the shares received or the supposed cash dividends (in order of
priority)
Under PAS 39, the category of the debt security shall be based on the
following.
Under PFRS 9, the category of the debt security shall be based on the BUSINESS
MODEL.
Financial assets at fair value (P/L or OCI) under PFRS 9 were recycling is
allowed for debt security categorized as FA@FMV through OCI.
Partial disposal of
Investment at
Amortized Cost – the
remaining investment
shall be retained as
Investment at
Amortized Cost (no
more tainting
provision under PFRS
9)