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    Chapter 11 Investments Additional Concepts Lecture

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    santillan.arnaldo.duran
    This document summarizes key concepts related to additional investments, including: - Accounting for regular purchases and sales of financial assets using trade date vs. settlement date accounting - Reclassifying financial assets when an entity's business model changes - Impairing financial assets measured at fair value through other comprehensive income - Recognizing dividends from equity investments - Measuring stock rights as equity instruments at fair value - Disclosing credit, liquidity, and market risks for financial instruments.

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    Chapter 11 Investments Additional Concepts Lecture

    Uploaded by

    santillan.arnaldo.duran
    164 views13 pages
    This document summarizes key concepts related to additional investments, including: - Accounting for regular purchases and sales of financial assets using trade date vs. settlement date accounting - Reclassifying financial assets when an entity's business model changes - Impairing financial assets measured at fair value through other comprehensive income - Recognizing dividends from equity investments - Measuring stock rights as equity instruments at fair value - Disclosing credit, liquidity, and market risks for financial instruments.

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    This document summarizes key concepts related to additional investments, including: - Accounting for regular purchases and sales of financial assets using trade date vs. settlement date accounting - Reclassifying financial assets when an entity's business model changes - Impairing financial assets measured at fair value through other comprehensive income - Recognizing dividends from equity investments - Measuring stock rights as equity instruments at fair value - Disclosing credit, liquidity, and market risks for financial instruments.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    164 views13 pages

    Chapter 11 Investments Additional Concepts Lecture

    Uploaded by

    santillan.arnaldo.duran
    This document summarizes key concepts related to additional investments, including: - Accounting for regular purchases and sales of financial assets using trade date vs. settlement date accounting - Reclassifying financial assets when an entity's business model changes - Impairing financial assets measured at fair value through other comprehensive income - Recognizing dividends from equity investments - Measuring stock rights as equity instruments at fair value - Disclosing credit, liquidity, and market risks for financial instruments.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 13

    Investments – Additional

    Concepts
    Learning Objectives
    • Account for regular way purchase or sale of financial
    assets.
    • Account for the reclassification of financial assets.
    • Account for the impairment of financial assets measured at
    FVOCI (mandatory).
    • Account for dividends received from investments.
    • Account for stock rights.
    • State the types of risks that are disclosed in the financial
    statements.
    Regular way purchase or sale of financial assets
    • A regular way purchase or sale is a purchase or sale of a financial asset
    under a contract whose terms require delivery of the asset within the
    time frame established generally by regulation or convention in the
    marketplace concerned.

    • Trade date accounting vs. Settlement date accounting


    a. Under trade date accounting, the financial asset purchased (s0ld) is
    recognized (derecognized) at the trade date (i.e., the date the entity
    commits to purchase or sell the financial asset).
    b. Under settlement date accounting, the financial asset purchased (s0ld) is
    recognized (derecognized) at the settlement date (i.e., the date the
    ownership of the financial asset is transferred).
    Fair value change between trade date & settlement date
    • For purchases of FVPL and FVOCI assets (but not
    amortized cost), the buyer recognizes the change in
    fair value between the trade date and the settlement
    date.

    • For sale transactions, the seller does not recognize


    the change in fair value between the trade date and
    the settlement date.
    Reclassification

    • After initial recognition, financial assets are reclassified only


    when the entity changes its business model for managing
    financial assets.

    • Reclassification date is the first day of the first reporting


    period following the change in business model that results in
    an entity reclassifying financial assets.
    Reclassification of debt-type financial assets
    Reclassification of debt-type financial assets
    Notes on reclassification
    • Only debt instruments can be reclassified. Equity instruments
    (e.g., investments in shares of stocks) cannot be reclassified.
    • Financial assets cannot be reclassified into or out of the
    “designated at FVPL” and “FVOCI - election”
    classifications.
    • The initial measurement is fair value at reclassification
    date, except for a reclassification from FVOCI to Amortized cost
    where the fair value on reclassification date is adjusted for the
    cumulative balance of gains and losses previously recognized in
    OCI.
    Impairment

    • The impairment requirements of PFRS 9 apply equally to


    debt-type financial assets that are measured either at
    amortized cost or at FVOCI.
    • Impairment gains or losses on debt instruments measured
    at FVOCI are recognized in profit or loss. However, the loss
    allowance is recognized in OCI and does not reduce the
    carrying amount of the financial asset in the statement of
    financial position.
    Dividends

    • Only cash and property dividends received from equity


    securities may be recognized as dividend revenue.
    Stock rights

    • Stock rights, being equity instruments, are measured at


    fair value.
    Disclosure of Risks on financial instruments

    1. Credit risk - The risk that one party to a financial instrument will
    cause a financial loss for the other party by failing to discharge an
    obligation.
    2. Liquidity risk - The risk that an entity will encounter difficulty in
    meeting obligations associated with financial liabilities that are settled
    by delivering cash or another financial asset.
    3. Market risk - The risk that the fair value or future cash flows of a
    financial instrument will fluctuate because of changes in market prices.
    Market risk comprises the following.
    • Interest rate risk
    • Currency risk
    • Other price risk
    1. Assignment:
     PROBLEM 6 - FOR CLASSROOM DISCUSSION of Chapter 11 (for
    submission November 18)

    2. Quiz (Chapters 9 to 11)

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