FINANCIAL ASSETS

FINANCIAL INSTRUMENTS AYON SA PAS 32

“Any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.”

May tatlong requirements para masabi nating financial instrument ang isang bagay:
1. May contract dapat
2. Dahil kontrata ito, may dalawang parties
3. Magkakaroon ng financial asset ang isang party at financial liability o equity ang isang party.

Narito ang mga halimbawa ng financial instruments:

Transactions Contracts Two Parties Financial Asset Financial

Liability/Equity
Sale on account Contract of sale Seller and Buyer Accounts Receivable, Accounts Payable,
Notes Receivable Notes Payable
Issuance of shares of Contract of sale of Investing entity and Investment in Equity Ordinary share,
stocks stocks Issuing entity Securities*, Trading Preference share
Securities
Loan from Financial Contract of loan Financial Institution Loans Receivable Loans Payable,
Institution** and Borrowing entity Mortgage Payable
Deposit in bank Contract of deposit Depositor and Bank Cash in Bank, Cash Deposits Liability
Equivalents (Time
Deposit)
*Investment in Equity Securities – investment kapag bumili ka ng shares of stocks ng isa pang corporation
** Financial Institution – mga entity na pwedeng utangan gaya ng bank, pawnshop, cooperative, etc.

Para sa lecture note na ito, ang focus natin ay sa FINANCIAL ASSET lamang. Ang financial liability ay parte ng Intermediate
Accounting 2

FINANCIAL ASSETS AYON SA PAS 32, PARAGRAPH 11

A financial asset is any paragraph that is

a. Cash
Ang cash ay asset ng holder at liability naman ng gobyerno
b. A contractual right to receive cash or another financial instrument from another entity
Ang halimbawa nito ay accounts receivable na asset ng seller na accounts payable naman ng buyer
c. A contractual right to exchange financial instrument with another entity under conditions that are potentially favorable
Halimbawa ay call option to buy shares of stocks na asset ng buying company na kapag favorable ang resulta ay magcacause ng
mas mababang cash outflow.

Halimbawa ng Option
Si Entity A ay gusting bumili ng stocks kay Entity B kaso kulang pa ang kanyang pambili. Dahil pabago
bago ang presyo ng stocks, may risk na baka tumaas ang presyo nito pag dumating na ang time na available na ang
pera ni Entity A. Dahil dito bumili siya ng option kay Entity B para bigyan sya ng panahon kung kailan mabibili pa
rin nya ang stocks sa napag-usapang presyo (strike price).

For example, sa option contract ang napag-usapan ay bibigyan siya ng isang buwan para makabili ng 1,000 shares ng
Entity B sa halagang P45 bawat share (ito ang strike price). Dumating na ang last day na epektibo ang option contract
at ang market price ng share ni Entity B ay P50 bawat share. Sa ganyang sitwasyon na mas mataas ang market price
sa strike price, s’yempre gagamitin moa ng option at magbabayad ka lang ng P45 per share sa halip na P50 per share.
Ito ung tinatawag na favorable condition na binabanggit sa taas dahil mas konti ang lalabas na pera dahil sa option
contract.

Kung halimbawa naman na ang market price ay P43 na lamang kada share, s’yempre common sense, huwag mo
nang gamitin ang option dahil mas mababa na ang market price sa strike price.

Note: May bayad ang pagbili ng option na tinatawag na option money. Hindi na ito refundable whether gamitin mo
o hindi ang option.

d. An equity instrument ng another entity

Kapag nag-invest ka sa shares ng isang corporation, asset mo iyan pero equity ng corporation kung saan ka bumili ng shares.

MGA HINDI KASAMA SA FINANCIAL ASSETS

a. Intangible Assets – franchise, copyright, trademarks, software, etc

 b. Physical Assets – Inventory, PPE
Dahilan kung bakit hindi financial asset: though makaka-generate ito ng cash kapag ginamit, hindi naman ito
magmumula sa isang contract
c. Prepaid Expenses – prepaid rent, prepaid insurance, prepaid advertising
Dahilan kung bakit hindi financial asset: ang marereceive mo ay goods or services at hindi cash or financial asset

INVESTMENTS BILANG FINANCIAL ASSETS

Ang focus ng lecture natin ngayon ay sa isang uri lang ng financial asset which is the INVESTMENTS. Pero hindi lahat ng investment
ay financial asset kagaya ng investment property.

Ayon sa IAS 25 (withdrawn at hindi adopted sa PAS), ang INVESTMENTS ay

“assets held by an enterprise for the accretion of wealth through distribution (such as interest, royalty, dividends and rentals),
for capital appreciation or for other benefits to the investing enterprise such as those obtained through trading relationship.”

Sa meaning na nasa taas, makikita natin ang purpose ng investment. May mga examples din ng mga investment for different purposes
based sa meaning.

Purposes Example ng Investments

Accretion of wealth through:
Interest Investment in Bonds
Dividends Investment in Equity Securities (ownership of
below 20 percent of the total outstanding
shares)
Royalties and Rentals Investment Property specifically building for
rentals
Capital Appreciation Investment Property specifically land without
intended use, land bought as investment
property,
Ownership Control Investment in Associate (ownership of 20% to
50% of the total outstanding shares)

Investment in Subsidiaries (ownership of more

Meeting Business Requirements
For payment of Bonds Payable
For redemption of Redeemable
Preference Shares
Other non-current funds
Protection
Trading
than 50% of the total outstanding shares)
Sinking fund (classified as Fund Investment
and normally maintained in a bank account)
Redemption fund (classified as Fund
Investment and normally maintained in a
bank account)
Plant Expansion Fund
Pension Fund and Life Insurance Fund
(classified as Fund Investment and normally
maintained in a bank account)
Investment in Stocks or Bonds measures at
Fair Value through Profit or Loss (FVPL)
(ito ay kapag ang purpose mo ng pag iinvest sa
stocks at bonds ay for buy and sell or simply
speaking, for trading)

INVESTMENTS: CURRENT O NON-CURRENT

Sa presentation sa balance sheet, depende sa nature investment kung sa current at non-current ito. Magbibigay ako ng liastahan sa
baba, pero malamang ay hindi mo pa mauunawaan ang ibang accounts. Ididiscuss ko iyo sa ibang handouts:

Current Non-Current
Trading Securities of Financial Assets Investment in Equity Securities at FVOCI (pwedeng
at FVPL stocks at bonds) – ‘yong bonds ay sa Handout 3 at stocks
(pwedeng stocks or bonds) – ay sa Handout 2 ang extensive discussion
Handout 1
Investment in Bonds at Amortized Costs – Handout 2 rin

Investment in Associate at Investment in Subsidiary –

Handout 4

Investment Property – Handout 5

Fund Investment, kapag non-current ang purpose –

Handout 6
 TIMELINE NG DISCUSSION NG INVESTMENT

INVESTMENTS

Trading
Financial Assets Financial Investment in
Securities/Fina at FVOCI – stocks Subsidiary at
Assets at Investment Fund
ncial Asset At Financial Asset at FVOCI - Investment in Property Investment
FVPL – stocks Amortized Cost - Associate
bonds
and bonds bonds

Handout 1 Handout 2 Handout 3 Handout 4 Handout 5 Handout 6

TRADING SECURITIES/FINANCIAL ASSET AT FAIR VALUE THROUGH PROFIT OR LOSS (STOCKS AND BONDS)

DEBT SECURITIES SECURITIES EQUITY SECURITIES

Nag-invest ang entity ay sa bonds. Ibig

Bumili ka ng shares of stocks ng isa pang
sabihin ay bumili ka bonds out of your
company. For this purpose, ang binili mong
excess cash. Ang purpose mo ay pwedeng
stocks ay below 20% ng total outstanding
trading o buy and sell of bonds (trading
shares. Ang reason mo kaya ka bumili nito
securities or FVPL), or pwedeng kumolekta
ay pwedeng trading or buy and sell (trading
ng contractual cash flows galing sa interest
securities or FVPL), at pwede rin naman na
at principal payment (amortized costs), or
i-hold mo ang mga shares para makakolekta
pwede ring pagsamahin ‘yong dalawang
ka ng dividend at pwede mo ring ibenta in
naunang purpose (FVOCI)
case na kulang na ang cash mo (FVOCI)

RULES SA INITIAL AT SUBSEQUENT MEASUREMENT NG INVESTMENT IN DEBT AT EQUITY SECURITIES

DEBT SECURITIES SECURITIES EQUITY SECURITIES

FOR TRADING? FVPL FOR TRADING?

Initial Measurement: Fair Value
NO YES or the Transaction Price
YES NO
Transaction Costs: Expensed
Outright
Subsequent Measurement: Fair
FOR COLLECTION FVPL
OF CONTRACTUAL Value FVPL
CASH FLOWS WITH IRREVOCABLE
ONLY? ELECTION TO
MEASURE AS FVOCI

FVOCI
Initial Measurement: Fair Value YES NO
NO YES plus Transaction Costs
Subsequent Measurement: Fair
Value
WITH FVOCI FVPL
IRREVOCABLE YES Note: Iba ang computation ng
DESIGNATION bonds sa stocks
TO MEASURE AS
FVPL
FVPL Note: May mga equity securities na
NO
AMORTIZED hindi determinable ang fair value dahil
“unquoted” ito, which means na hindi ito
FOR
Amortized
Costs
COST ibenenta sa stock market. Kapag unquoted
COLLECTTION OF Initial Measurement: Fair Value ang securities na binili mo, hindi applicable
CONTRACTUAL
CASH FLOWS plus Transaction Costs ang fair value measurement kagaya ng FVPL
YES/YES FVPL
AND FOR SALE? Subsequent Measurement: at FVOCI, kaya sa COST na lang ito
WITH Amortized Costs imemeasure.
IRREVOCABLE
DESIGNATION TO
MEASURE AS YES/NO FVOCI
FVPL?
COMPARISON NG TATLONG MEASUREMENT BASIS

FVPL FVOCI AMORTIZED COST (bonds

only)
Ano ang treatment ng transaction Expensed Outright Ibawas sa fair value Idagdag sa fair value
costs during initial measurement?
Current o Non-current? Current Non-current Non-current
Purpose kung bakit ka nag- Trading or buy and sell Stocks – hawakan mo to collect *Remember, walang measurement
invest? dividend in the future then pwede na ganito ang stocks
ring ibenta kung need ng cash Bonds - gusto mong may
Bonds – gusto mong may makakolekta ng cash from interest
makakolekta ng cash from interest and principal payment
and principal payment at pwede
mo ring ibenta if need mo ng cash
Subsequent Measurement Fair Value Stocks – Fair Value Bonds – amortized costs
Bonds – amortize muna then
adjust sa fair value
Saan mapupunta ang changes sa Profit or loss at tatawaging OCI at tatawaging Unrealized gain Walang changes in fair value dito
fair value? Unrealized gain/loss or loss. Kapag ibinenta na o upon kasi amortize costs ang
derecognition for what ever subsequent measurement
reason, deretso na sa retained
earning at di na dadaan sa P/L
Saan mapupunta ang interest at Dividend income at interest Dividend Income at Interest Amortization ay plus or minus sa
dividend na matatanggap at ang income Income para sa dividend at interest income. (sa ibang handout
amortization ng bond premium at interest na matatanggap. Ang ko to ididicuss)
amortization ng bond premium at
discount*?
bond discount ay plus or minus sa
interest incomes Ito rin ang
gagamitin sa amortization
(madidiscuss ‘to sa ibang handout)
*Ang bond ay maaaring ibenta nang mas mataas (premium) o mas mababa (discount) sa face value. Ibig sabihin, kung ang bibilhin mong bond ay may face value na 1,000, pwede
itong mabili nang 1,100 (100 premium) o 950 (50 discount). Kung may premium ang nabili mong bond, sa halimbawa na ibinigay ko, papautangin moa ng bond issuer ng 1,100
pero ang ibabayad nya ay 1,000 na principal plus interest. Kaya ‘yong 100 premium ay lumalabas na kabawasan sa interes na natanggap. Maaari kasing mataas ang interest rate
ng bond kaya pumayag ka na may premium. ‘Yong discount naman ay kabaligtaran lang.

SAMPLE PROBLEMS PARA SA TRADING SECURITIES (STOCKS AND BONDS)

On January 1, 2019, Template Company purchased 1,000 ordinary shares from SBC Corporation for trading purposes. Each share costs
P54. On June 23, 200 shares are sold at P60 per share. On December 31, the equity securities are quoted at P58 per share.
Required: Make the necessary journal entries.

January 1 Trading Securities or Financial Asset through FVPL 54,000

Cash 54,000
To record purchase of shares to be held for trading.

June 23 Cash 12,000

Gain from Sale of Trading Securities 1,200
Trading Securities or Financial Asset through FVPL 10,800
To record sale of 200 shares.

December 31 Trading Securities or Financial Asset through FVPL 3,200*

Unrealized Gain – Trading Securities 3,200
To record gain from changes in fair value of trading securities.

Frequently Asked Questions (FAQs)

Q1: Paano nacompute ang 3,200 na unrealized gain noong reporting period?
A1: 1000 shares less 200 shares na nabenta noong June 23 kaya 800 shares na lang ang natira. From 54 na initial measurement, tumaas sa 58 ang
shares, which means may changes na 4 pesos sa fair value. 800 shares times 4 pesos equals 3,200

Q2: Bakit Gain from sale ang ginamit na account noong June 23 at hindi Unrealized Gain?
A2: S’ymepre, nabenta na ung asset kaya gain na, unlike noong December 31 na imaginary pa lang o paper gain ung pagtaas sa value kaya
unrealized pa ‘yon.

Q3: Saan pupunta ‘yong Unrealized Gain?

A3: Sa profit or loss pa rin at hindi sa OCI dahil ang purpose mo naman ay trading which means in the near future ay marerealize mo din agad
‘yong unrealized gain. Kumbaga, doon rin naman ang punta sa realized
Q4: So, parehong sa profit or loss ang gain at unrealized gain?
A4: Oo. wala namang problema d’un.

Q5: Paano naman kung Investment in Bonds na trading din ang purpose?
A5: Huwag ka masyadng ma-stress. Palitan mo lang ng account ‘yong Trading Securities or Financial Asset through FVPL, gawin mong
Investment in Bonds. Others, same treatment na.