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Financial Assets at Fair Value

This document discusses the classification and measurement of financial assets under PFRS 9. It defines financial assets and provides examples, such as cash, accounts receivable, investments in shares, bonds, and funds. Equity securities represent ownership interests, while debt securities represent creditor relationships. Financial assets are initially measured at fair value plus transaction costs, except for those classified as fair value through profit or loss (FVPL), which are measured at fair value. Subsequent measurement depends on the classification as FVPL, fair value through other comprehensive income (FVOCI), or amortized cost based on the business model. Equity investments are generally measured at fair value through profit or loss or fair value through other comprehensive income

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42 views3 pages

Financial Assets at Fair Value

This document discusses the classification and measurement of financial assets under PFRS 9. It defines financial assets and provides examples, such as cash, accounts receivable, investments in shares, bonds, and funds. Equity securities represent ownership interests, while debt securities represent creditor relationships. Financial assets are initially measured at fair value plus transaction costs, except for those classified as fair value through profit or loss (FVPL), which are measured at fair value. Subsequent measurement depends on the classification as FVPL, fair value through other comprehensive income (FVOCI), or amortized cost based on the business model. Equity investments are generally measured at fair value through profit or loss or fair value through other comprehensive income

Uploaded by

gab camon
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Financial Assets at Fair Value

Monday, July 6, 2020 11:24 PM

Investments
IASB - assets held for accretion of wealth trough distribution such as interest, royalties dividends and
rentals for capital appreciation.
Assets not directly identified with operation activities
Auxiliary relationship to revenue

Purpose of investments
a. For accretion of wealth - royalties, dividends, interest, rentals
b. For capital appreciation - land, diamonds, golds
c. Ownership control - subsidiaries, associates
d. Meeting business requirement -sinking fund, PS redemption fund, plant expansion fund
e. Protection - life insurance, cash surrender

Examples of investments
a. Trading securities or FA@FVPL
b. FA@FVOCI
c. Investment in non-trading equity security
d. Investment in bonds at amortized cost
e. Investment in associate
f. Investment in subsidiary
g. Investment in property
h. Investment in fund
i. Investment in joint venture

Statement classification
Current - realizable within 1 year
Noncurrent or long term - not realizable within 1 year

Financial Asset
a. Cash
b. Contractual right to receive cash or another financial asse - A/R
c. Contractual right to exchange financial instrument under favorable terms - options, warrants
d. Equity of another entity - shares

Examples:
1. Cash or currency
2. Deposit of cash
3. A/R, N/R, L/R
4. Option
5. Investment in shares

Not Financial assets


1. Gold
2. Intangible asset - patent
3. Physical asset - inventory, PPE
4. Prepaid expense
5. Leased assets

Classification of Financial Asset - financial instrument


PFRS 9

Equity Investment Page 1


PFRS 9
1. FA @ FVPL - Equity and Debt Securities
2. FA @ FVOCI - Equity and Debt Securities
3. FA @ Amortized cost - Debt Securities

Classification depends on business model


1. Hold investment to realize fair value changes
2. Hold investment to collect contractual cash flow - amortized
3. Hold investment to collect contractual cash flow and sell investment

Equity Security
Ownership interest
Ownership shares (OS, PS), rights, warrants, options
Shareholders - owners
Share - ownership interest or right
Share Certificate - evidence
Right - earnings, election of directors, subscribe add. Shares, shares in liquidation
Do not include
a. Redeemable PS
b. Treasury shares
c. Convertible debt

Debt Security
Creditor relationship
Maturity date and maturity value
Examples:
a. Corporate bonds
b. BSP Treasury bills
c. Government securities
d. Commercial papers
e. PS with mandatory redemption date or redeemable

Financial Asset Initial measurement


Non trading - Fair Value + Transaction Cost
Trading of FA @ FVPL - Fair Value
• Transaction cost - fees, commissions, levies, transfer tax and duties
• Do not include - premiums, discounts, financing, internal administrative or holding cost

Subsequent measurement:
a. FA @ FVPL
b. FA @ FVOCI
c. FA @ Amortized cost

F A @ FVPL
1. Trading securities
2. Quoted equity instrument
3. FA that are irrevocably designated - investment in bonds and debt security even if satisfy the AC
and FA@FVOCI
4. All debt instrument not classified as AC or FA @FVOCI - default

• Financial asset held for trading


- Debt and Equity purchased for purpose of selling
- Part of portfolio managed together evidenced by recent pattern of profit taking
- Derivative except financial guarantee contract, hedging instrument

Equity Investment Page 2


- Derivative except financial guarantee contract, hedging instrument
- Current Assets

Equity investment at OCI

Equity Investment Page 3

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