Chapter 11 Equity Investment

1. Own shares of another entity

2. “Passive Income”
a. 20%-50% of OOS – provided significant influence cannot be exercised
b. Less than 20% of OOS
c. Preference shares (regardless of % / non-voting shares

2 Classifications of Equity Investments

1. FVPL – trading, non-trading, all other quoted investments

a. Initial measurement: purchase price at transaction
b. Transaction cost: expensed immediately/outrightly
c. Subsequent measurement: fair value
 Changes in fair value > P/L
d. Dividends Received income > P/L
e. On disposal:
Net Proceeds xx
CA of invest. (xx)
Gain or loss xx/(xx) . P/L
f. No impairment
2. FVOCI – nontrading irrevocably designated > FVOCI
a. Initial measurement: purchase price + transaction cost
b. Subsequent measurement: fair value
 Changes in FV > OCI
c. Dividends Received: Income > P/L
d. No Impairment
e. On disposal:
Net Proceeds xx
CA of Invest. (xx)
Gain or loss xx/(xx)
 No recycling to P/L
 Retained Earnings
1. Proceeds > CA of Inv.
2. Cumulative OCI
Pg. 374 Straight Problems

1. 1/1/23 FA @ FVTPL (200,000 x 5) 1,000,000

Transaction Cost 9,000

Cash 1,009,000

12/31/23 FA @ FVTPL (200,000 x .75) 150,000

Unrealized Gain – P/L 150,000
12/31/24 FA @ FVTPL (200,000 x .6) 120,000
Unrealized Gain – P/L 120,000
1/10/25 Cash 1,310,000
Net Proceeds 200,000 x 6.55 = 1,310,000
FA @ FVTPL 1,270,000
Gain on Sale 40,000 CA of Invest. 200,000 x 6.35 = (1,270,000)
Transaction Cost 12,000
Gain 40,000
Cash 12,000

2. 1/1/23 FA @ FVTOCI (1,000,000+9,000)1,009,000

Cash 1,009,000

12/31/23 FA @ FVTOCI 141,000 200,000 x 5.75 = 1,160,000

Unrealized Gain – OCI 141,000 (1,009,000)

12/31/24 FA @ FVTOCI 120,000 141,000

Unrealized Gain – OCI 120,000 2023 1,150,000

1/10/25 Cash 1,310,000 2024 (1,270,000)
FA @ FVTOCi 1,270,000
120,000
Gain on Sale – OCI 40,000
Unrealized Gain 261,000
Gain on Sale 40,000
Retained Earnings 301,000
Transaction Cost 12,000
Cash 12,000
3. (pero #5 jd ni)

2022 2023 2024 2025

AAA 2,600,000 2,650,000 2,720,000 2,790,000
BBB 1,300,000 1,150,000 1,400,000 1,560,000
FA @ FVTPL 3,900,000 3,,800,000 4,120,000 4,350,000

FA @ FVTOCI 1,900,000 1,700,000 1,480,000 1,850,000

b. 2023 2024 2025

income statement (P/L) (100,000) 320,000 230,000
 other comp. inc.(OCI) (200,000) (220,000) 370,000

statement of Comp. Inc (300,000) 100,000 600,000

Chapter 11a

Cash Dividend – Face Value

Property Dividend – Fair Value

Liquating Dividends – reduction to FA

Share Dividend -