Good afternoon,
I have a question regarding an investment that is valued at FVOCI. The warrants will expire soon and wanted some advice on how the derecognition should be handled in accordance with IFRS 9. Can someone please confirm if my understanding is correct below:
1. remeasure the investment at the expiry date with any loss or gain recorded to OCI.
2. Derecognize the investment on the balance sheet with the corresponding gain or loss to P&L?
3. What happens to the balance in OCI? Does it just sit there or should the balance be reclassed to Retained Earnings?
Appreciate your thoughts and feedback.
Thank you
IFRS 9 - Financial Asset
Re: IFRS 9 - Financial Asset
Hi,
I'd say that if you recycle it in the P&L, it will not be sitting in OCI anymore...Furthermore, if it's an equity instrument designated as FVOCI, it can't be recycled into P&L.
In the end, you can reclassify it from OCI to retained earnings.
I'd say that if you recycle it in the P&L, it will not be sitting in OCI anymore...Furthermore, if it's an equity instrument designated as FVOCI, it can't be recycled into P&L.
In the end, you can reclassify it from OCI to retained earnings.
Re: IFRS 9 - Financial Asset
Thank you, Leo. It is an equity instrument designated at FVOCI. So what would be the entry at derecognition?
Re: IFRS 9 - Financial Asset
Cr : Equity instrument
Dr : Cash
Dr/Cr : OCI (Delta)
Dr/Cr : OCI
Dr/Cr : Retained earnings
?
Dr : Cash
Dr/Cr : OCI (Delta)
Dr/Cr : OCI
Dr/Cr : Retained earnings
?
Re: IFRS 9 - Financial Asset
Thanks again. There is no cash in exchange. These warrants expired and were cashless as the exercise price was higher than the current market value. I take that the entry will be Cr Financial Asset/ Dr OCI in full ?
Re: IFRS 9 - Financial Asset
Aren't warrants derivatives and thus are classified at FVTPL mandatorily?
Re: IFRS 9 - Financial Asset
I think you are right Marek, if it's a puttable, it can't be equity instrument. Hence, can't be classified as FVTOCI.
However, are there any exceptions on some specific types of warrants ?
However, are there any exceptions on some specific types of warrants ?
Re: IFRS 9 - Financial Asset
Interested how Feryal assessed on initial recognition that it was a FVOCI asset.
Re: IFRS 9 - Financial Asset
Yep, it would be interesting to hear Feryal's perspective!