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INVESTMENTS
EQUITY INVESTMENTS PFRS 9 VS PAS 39
PAS 39
@FV P/L
@FV OCI
Initial recognition
- Fair value (GRG)
- Fair value (GRG) +
- Transaction costTransaction cost
expensed
Balance Sheet
Fair Value @ BS date
Fair Value @ BS date
Valuation
xx
xx
CV
Original Cost
(xx)
(xx)
UG (UL) P/L
UG (UL) SHE
xx
xx
Fair Value @ BS date
xx
CV
(xx)
UG (UL) OCI-SCI
xx
Disposal
Proceeds
Proceeds
xx
xx
CV
Original Cost
(xx)
(xx)
Gain (Loss) P/L
Gain (Loss) P/L
xx
xx
Impairment
FMV
FMV
(permanent)
xx
xx
CV
Original Cost
(xx)
(xx)
Loss P/L
Loss P/L
xx
xx
Recovery of
Subsequent increase
No recovery recognized:
Impairment
recoded in the P/L
Fair Value @ BS date
xx
Original Cost
PFRS 9
@FV P/L
Same with
PAS 39
@FV OCI
Same with
PAS 39
Same with
PAS 39
Same with
PAS 39
Same with
PAS 39
*no gain/loss on
disposal all
transferred to R/E
Same with
PAS 39
*recorded in
SHE/OCI same way
as temporary
decline
Same with
PAS 39
*recorded in
SHE/OCI same way
Transfer
(xx)
UG (UL) SHE
Into TS- not allowed
Out of TS- Rarely (treated currently and
prospectively)
xx
Initial
recogniti
on
Balance
Sheet
Valuatio
n
Disposal
AFS
Fair value (GRG) +
Transaction cost
excluding accrued
interests
FV @ BS date
xx
AC
(xx)
UG (UL) SHE
PFRS 9
FV OCI
Same with
PAS 39
HTM
Same with
PAS 39
Same with
PAS 39
Same with
PAS 39
xx
FV @ BS date
xx
CV
(xx)
UG (UL) OCI
xx
Proceeds
Proceeds
Proceeds
Proceeds
Proceeds less
xx
AC + accrued
(xx)
Gain (Loss) P/L xx
Impairm
ent
(perman
ent)
Recover
y of
Impairm
ent
FMV
xx
Amortized Cost
(xx)
Loss P/L
xx
AC no impairment
xx
AC of impaired
(xx)
Gain P/L
xx
FV @ BS date
xx
AC
(xx)
xx
AC + accrued
(xx)
Gain (Loss) P/L
xx
*Partial sale:
investment is
tainted and
therefore must be
reclassified to
AFS
FMV remaining
xx
AC remaining
(xx)
SHE OCI
xx
PV of FCF
xx
AC
(xx)
Loss P/L
xx
AC no impairment
xx
AC (FCF @ ER)
(xx)
Gain P/L
xx
xx
CV @ BS date
(xx)
Gain (Loss) P/L
xx
FMV
xx
CV
(xx)
Loss P/L
xx
Subsequent
increase recoded in
the P/L
xx
FMV/CV
(xx)
Gain (Loss) P/L xx
transaction costs xx
Amortized + accrued
(xx)
Gain (Loss) P/L
xx
*no tainting provision
No Impairment
Same with
PAS 39
No Recovery
Same with
PAS 39
UG (UL) SHE
xx
INVESTMENT IN ASSOCIATE
- Equity method for investors holding 20-50% of outstanding voting shares with significant influence on the
operations of the corporation
Investment in Associate
Beginning Balance (Cost At
Acquisition)
Share in Dividends
*Share in Net Income
Share in Net Loss
(Adjusted/Amortized)
Share in OCL
Share in OCI
Ending Balance
Associates Net Income
Multiply: Interest
Amortization:
Current Asset understatement x interest
Depreciable asset understatement/remaining life x interest
Current Liability overstatement x interest
*Adjusted share in net income
xx
xx%
xx
xx
xx
xx
(xx)
xx
CESSATION- when company loses significant influence over the investee company (results from disposal or a portion
of the investment)
Realized
xx
Unrealized
xx
*xx
xx(xx)
*xx(xx)
xx(xx)
*xx
xx(xx)
*xx(xx)
xx(xx)
Total
xx
xx
xx
xx
xx(xx)
xx(xx)
xx(xx)
DILUTION OF DEEMED SALE- decrease in interest but retains significant influence (results from issuance of new
share by the investee)
Deemed share from the increase in net assets of associate
(proceeds from issue of new shares x % of interest after dilution)
CV of investment deemed sold (CX x decrease in interest/
original interest)
Gain (Loss) on deemed sale before recycling of OCI (OCL)
Recycling of OCI (OCL)
Gain or loss
xx
(xx)
xx(xx)
xx(xx)
xx(xx)
STEP UP ACQUISITION
A) Cost Based Approach with Catch up Adjustment
o Retroactive effect- as though the investment was at equity method from the date the original investment
had been acquired but proper ownership of interest is used in the computation
o Income that should have been recognized under the equity method
xx
Investment income recognized under FV approach
(xx)
Adjustment to the R/E
xx
B) Cost Based Approach without Catch up Adjustment
o Original Cost of the original investment
xx
Cost of the New Investment
xx
Initial Recognition of the Investment in Associate
xx
C) Fair Value Approach (PFRS 3 BASED APPROACH)
o Current FMV of the original investment
xx
Cost of the New Investment
xx
Initial Recognition of the Investment in Associate
xx
INVESTMENT PROPERTIES
o LAND or BUILDING held for the purpose of rental earnings, capital appreciation or both. DOES NOT include property
held for the purpose of use in production, supply of goods/services, or use in administration and use for normal
course of business
o Examples of Properties treated as investment property:
a. Building that is being constructed for future use as investment property
b. Land or Building Leased out under operating lease
c. Land or Building held for undetermined use
o Valuation of Investment Properties
a. COST METHOD
- Similar to PPE (cost less accumulated depreciation)
b. FAIR VALUE METHOD
- Valued at FV; difference b/n FV and CV shall be recognized as UG/UL in the P/L