About IFRS 9.B5.2.2 Amortisation of Commission Fees on Disposal of Financial Assets FVOCI

[hkg scheduler]

Dear Marek & Members,

I am puzzling with the example given in IFRS 9.B5.2.2 in regard to the Amortisation of Commission Fee of $3.
An entity acquires a financial asset for CU100 plus a purchase commission of CU2. Initially, the entity recognises the asset at CU102. The reporting period ends one day later, when the quoted market price of the asset is CU100. If the asset were sold, a commission of CU3 would be paid. On that date, the entity measures the asset at CU100 (without regard to the possible commission on sale) and recognises a loss of CU2 in other comprehensive income. If the financial asset is measured at fair value through other comprehensive income in accordance with paragraph 4.1.2A, the transaction costs are amortised to profit or loss using the effective interest method.

If the Financial Asset is SOLD in the next day of purchase, should I still Amortise the Commission Fee of $3 over the Life of the Financial Asset (using Effective Interest Method) & Recognises in P/L?

Many thanks once again for any answering!

Alvin

[pub_acco]

I believe "the transaction costs" in the underlined statement mean the purchase commission of CU 2 only, but B5.2.2 is very confusing....

[Marek Muc]

yes, so we're talking about the commission paid at acquisition (CU 2 in the example)

if it's a debt instrument (under para 4.1.2A), this CU 2 becomes a part of the amortised cost recognised in P&L, and the FV changes vs amortised cost go to OCI
i it's an equity instrument (under para 5.7.5), then there's no amortised cost, so the FV change vs purchase price (i.e. commission) goes to OCI

further reading:

https://ifrscommunity.com/knowledge-bas ... abilities/
https://ifrscommunity.com/knowledge-bas ... struments/
https://ifrscommunity.com/knowledge-bas ... rest-rate/