IFRS 9 - FVOCI Investment in Equity

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arif.asif
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IFRS 9 - FVOCI Investment in Equity

Post by arif.asif »

Hello
I am been working at accounting firm, there i have seen an investment classified at FVOCI (With no Recycling). Investment is in an unlisted/unquoted Company.
Investment was made at price of Rs. 9.8 per share then later valued at Rs. 10 per share. Valuation was made through Discounted Cashflow Method or Free Cashflow Method. The Company's Breakup value is Rs. 24.12. The question is can a breakup value be more than the Fair value of Rs.10 and if cant be than what will be the accounting treatment?
JRSB
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Re: IFRS 9 - FVOCI Investment in Equity

Post by JRSB »

What is breakup value? The return per share on winding up the company? If so presumably there were some very undervalued assets in there or assets that weren't correctly assessed when valuing the private company.
arif.asif
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Re: IFRS 9 - FVOCI Investment in Equity

Post by arif.asif »

So you mean there will be impairment on the assets of the company
arif.asif
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Re: IFRS 9 - FVOCI Investment in Equity

Post by arif.asif »

So what will be impact on the financials of the investing company?
JRSB
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Re: IFRS 9 - FVOCI Investment in Equity

Post by JRSB »

I'm just asking what you mean by breakup value.
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Marek Muc
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Re: IFRS 9 - FVOCI Investment in Equity

Post by Marek Muc »

this more or less?:
https://www.investopedia.com/terms/b/breakup-value.asp

I guess the breakup value was also calculated using some kind of DCF methods? I would start with understanding the difference between Rs 10 and Rs 24 before proceeding with accounting implications
DJP
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Re: IFRS 9 - FVOCI Investment in Equity

Post by DJP »

This is not an accounting question. It is a valuation question. You need to make sure that the valuation model you are using is correct/valid. If your DCF model suggests a value way below the break up value, I guess this is saying something about the inputs you are using in your DCF model. I recommend having a valuations expert analysing your model. The accounting is fairly simple once you have determined the fair value.
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