Chapter 14 - Financial Asset at Fair Value
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CHAPTER 14 – FINANCIAL ASSETS @ FAIR VALUE FINANCIAL ASSETS @ FAIR VALUE (ONLY INCLUDES DEBT & EQUITY SECURITIES) Financial Assets held for trading (Trading Securities) Irrevocable designated on initial recognition as at fair value through profit or loss QUOTED equity instruments FINANCIAL ASSETS @ FAIR VALUE THROUGH PROFIT OR LOSS o INITIAL MEASUREMENT – FAIR VALUE ONLY (DISREGARD TRANSACTION COSTS) o SUBSEQUENT MEASUREMENT – FAIR VALUE @ YEAR END Increase: Dr. Trading Securities XX Cr. Unrealized Gain – TS XX Decrease: Dr. Unrealized Loss – TS XX Cr. Trading Securities XX SALE Gain: Dr. Cash XX Cr. Trading Securities XX Cr. Gain on sale of Trading Securities XX Loss: Dr. Cash XX Dr. Loss on sale of Trading Securities XX Cr. Trading Securities XX NOTE: 1. Unrealized Gain/Loss are part of Profit or Loss 2. Transaction Costs are EXPENSED OUTRIGHT 3. The account is not necessarily Trading Securities, it may be generalized as Financial Asset at Fair Valu
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Transcript of Chapter 14 - Financial Asset at Fair Value
CHAPTER 14 FINANCIAL ASSETS @ FAIR VALUE
FINANCIAL ASSETS @ FAIR VALUE (ONLY INCLUDES DEBT & EQUITY SECURITIES) Financial Assets held for trading (Trading Securities) Irrevocable designated on initial recognition as at fair value through profit or loss QUOTED equity instruments
FINANCIAL ASSETS @ FAIR VALUE THROUGH PROFIT OR LOSS INITIAL MEASUREMENT FAIR VALUE ONLY (DISREGARD TRANSACTION COSTS) SUBSEQUENT MEASUREMENT FAIR VALUE @ YEAR ENDIncrease: Dr. Trading SecuritiesXXCr. Unrealized Gain TSXX
Decrease:Dr. Unrealized Loss TSXXCr. Trading SecuritiesXX SALEGain:Dr. CashXXCr. Trading SecuritiesXXCr. Gain on sale of Trading SecuritiesXX
Loss: Dr. CashXXDr. Loss on sale of Trading SecuritiesXXCr. Trading SecuritiesXX NOTE:1. Unrealized Gain/Loss are part of Profit or Loss2. Transaction Costs are EXPENSED OUTRIGHT3. The account is not necessarily Trading Securities, it may be generalized as Financial Asset at Fair ValuFINANCIAL ASSETS @ FAIR VALUE Investment in Equity Securities NOT held for trading but IRREVOCABLY ELECTED TO PRESENT CHANGES IN FAIR VALUE IN OTHER COMPREHENSIVE INCOME
FINANCIAL ASSETS @ FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME INITIAL MEASUREMENT FAIR VALUE + TRANSACTION COSTS SUBSEQUENT MEASUREMENT FAIR VALUE @ YEAR ENDIncrease: Dr. Investment in Equity SecuritiesXXCr. Unrealized Gain OCIXX
Decrease: Dr. Unrealized Loss OCIXXCr. Investment in Equity SecuritiesXX
CUMULATIVE UNREALIZED GAIN/LOSSORIGINAL COST - CURRENT MARKET VALUE OF SECURITIES = CUMULATIVE UNREALIZED GAIN/LOSS SALEGain: Dr. CashXXCr. Investment in Equity SecuritiesXXCr. Gain on sale of SecuritiesXX
Loss: Dr. CashXXDr. Loss on sale of SecuritiesXXCr. Investment in Equity SecuritiesXX
UNREALIZED GAIN/LOSS of SOLD SECURITIESUnrealized Gain: Dr. Unrealized Gain XXCr. Retained Earnings XX
Unrealized Loss: Dr. Retained EarningsXXCr. Unrealized LossXX
NOTE:1. ALWAYS TRANSFER RELATED UNREALIZED GAIN/LOSS to RETAINED EARNINGS AFTER SALE
RECLASSIFICATION Reclassification Date is the first day of the reporting period following the change in business model So, if the change in business model occur in 2012, the reclassification date is January 1, 2013
FAIR VALUE -> AMORTIZED COST Year of change in business model DO THE USUAL ADJUSTMENS FOR THE RECOGNITION OF THE CHANGE IN FAIR VALUE Reclassification Date:Dr. Investment in bondsXXCr. Financial Assets at Fair ValueXX
AMORTIZED COST -> FAIR VALUE Year of change in business model DO THE USUAL, such as AMORTIZATION OF DISCOUNT/PREMIUM Reclassification Date Recognize gain (Fair Value at such date - Carrying Amount) & Reclassify Investment in Bond account to Financial Asset at Fair Value.Dr. Investment in bondsXXCr. Gain on Reclassification of Financial AssetXX
Dr. Financial Assets at Fair ValueXXCr. Investment in bondsXX
IMPAIRMENT FINANCIAL ASSET AT FAIR VALUE NO IMPAIRMENT LOSS, because financial asset is always at Fair Value
