IFRS 9 - FINANCIAL ASSET (Partial disposal of equity instruments held for trading)
Posted: 15 Nov 2021, 17:51
Hello all,
I need assistance and advice on this particular matter that is bugging me.
An entity (only business activities is to buy/sell shares frequently) has this financial asset that is quoted shares that is held as an investment and due it being equity investments there are at fair value through P/L.
Now here come my query:
There are several transactions throughout the financial period:
1. The initial purchase was 10,000 shares at $1 per share = $10,000
2. The second purchase was 15,000 shares at $2 per share = $30,000 (carrying amount $40k or $1.6 per share weighted average)
3. Then a sale took place of 20,000 shares at $3 per share = $60,000
My question is:
1. When accounting for the sale, which purchase price do we use? The FIFO method for its purchase price vs fair value or the weighted average purchase price vs its fair value?
2. After the the purchase and sales movement and at the end of the financial reporting period, we will need to also measure at FVTPL and that goes back to my question 1.
Entries (ignore transaction cost etc.)
1.
DR Investment in securities (FA) $10k
CR Cash $10k
2.
DR Investment in securities (FA) $30k
CR Cash $30k
3.
DR Cash $60k
CR Investment in securities (FA) ??
CR Fair value gain on disposal of securities ??
--
Thank you guys!
I need assistance and advice on this particular matter that is bugging me.
An entity (only business activities is to buy/sell shares frequently) has this financial asset that is quoted shares that is held as an investment and due it being equity investments there are at fair value through P/L.
Now here come my query:
There are several transactions throughout the financial period:
1. The initial purchase was 10,000 shares at $1 per share = $10,000
2. The second purchase was 15,000 shares at $2 per share = $30,000 (carrying amount $40k or $1.6 per share weighted average)
3. Then a sale took place of 20,000 shares at $3 per share = $60,000
My question is:
1. When accounting for the sale, which purchase price do we use? The FIFO method for its purchase price vs fair value or the weighted average purchase price vs its fair value?
2. After the the purchase and sales movement and at the end of the financial reporting period, we will need to also measure at FVTPL and that goes back to my question 1.
Entries (ignore transaction cost etc.)
1.
DR Investment in securities (FA) $10k
CR Cash $10k
2.
DR Investment in securities (FA) $30k
CR Cash $30k
3.
DR Cash $60k
CR Investment in securities (FA) ??
CR Fair value gain on disposal of securities ??
--
Thank you guys!