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for question 7 of September 2016, I have no idea about why the fair value movements should be recorded in profit or loss or other comprehensive income. may you explain sir?
Here’s the extract from IASPLUS website – I believe that this answers your question:
“Equity instruments
All equity investments in scope of IFRS 9 are to be measured at fair value in the statement of financial position, with value changes recognised in profit or loss, except for those equity investments for which the entity has elected to present value changes in ‘other comprehensive income’. There is no ‘cost exception’ for unquoted equities.
‘Other comprehensive income’ option
If an equity investment is not held for trading, an entity can make an irrevocable election at initial recognition to measure it at FVTOCI with only dividend income recognised in profit or loss. [IFRS 9, paragraph 5.7.5]”
In the question, investment 1 is not held for trading and the entity wishes to avoid as much as possible the unpredictable movements in profit or loss. So an irrevocable election has been made on acquisition for treatment through comprehensive income
For investment 2, this is governed by the general rule that “All equity investments in scope of IFRS 9 are to be measured at fair value in the statement of financial position, with value changes recognised in profit or loss” and the fair value through comprehensive income option is not available because the investment IS held for trading
OK?
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