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February 22, 2021 at 8:47 pm
I have small confusion about transaction cost, when we add transaction cost to cost and when we treat as expense?
February 22, 2021 at 9:03 pm
They will be treated as an expense when we acquire a financial asset that is classified at fair value through profit or loss. Any other classification of a financial asset (FVTOCI or amortised cost), the transaction costs will be added to the fair value at the acquisition date.
July 22, 2020 at 7:37 am
Hi, I have a question and would be happy to get an answer to it
My BPP book says that:
Under IFRS 9 all financial assets should be initially measured at cost = fair value plus transaction costs.
In this lecture we met that criteria for assets at FVTOCI, we recognised them as 500000 + 40000 = 540000
but then why we expensed the transaction cost at FVTPL and recognised it as 500000
if the standard says that ALL financial assets should be initially measured at cost = fair value plus transaction costs??
thanks and regards
August 5, 2020 at 1:08 pm
Under IFRS 9 all financial instruments are initially measured at fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs. This requirement is consistent with IAS 39.
June 4, 2020 at 3:20 am
Why do we initial measurement of financial asset is done at fair value why is it not done at purchase cost + transaction cost.
It means initially on day of purchase if fair value is other than purchase cost shall we have to recognize the financial asset at fair value
June 4, 2020 at 10:36 am
The purchase cost is the fair value.
May 23, 2020 at 12:22 pm
Hi, is the derecognition of the investment accounted for as below?
DR bank $650,000
CR investments $620,000
CR SPL $30,000
July 1, 2020 at 2:41 pm
Dr Revaluation reserve $80,000
Cr Retained earnings $80,000
October 21, 2020 at 7:11 pm
That’s how I’ve done it too
May 18, 2020 at 10:49 pm
Sir, you say that the downward revaluation is recorded as an expense in the SPLOCI, am I correct that it will be treated as an impairment?
January 8, 2020 at 2:40 pm
Hi. Can anyone tell me why on the first example the cost was debited by the SPL and in the second example the cost was included in the investment?
January 15, 2020 at 9:11 am
Hi, I believe in the first one it was a cost (or loss) due to decreasing of the investment value, But in the second one it was a cost that we made to purchase the investment
January 16, 2020 at 6:54 am
The first question is about default measurement that is FVTPL.if it is classified as FVTPL the transaction cost will treated as expense
October 5, 2019 at 8:09 pm
sir if the company bought the same share through out the whole year(every quarter as part of to hostile takeover) , then the fair value should be measure separate or average out the cost by adding up all the share value through out the transaction and divide by to quantity of the share?
August 28, 2019 at 5:34 pm
can you please tell me what will be the treatment of FVTOCI if there is a downward revaluation of $ 1,000?
this is the 1st time revaluation and we don’t investment reserve balance
please write journal entries also
July 1, 2020 at 2:36 pm
it would be an impairment I guess.
Dr Impairment loss
August 12, 2019 at 3:08 pm
I have a question. I thought that the initial measurement for Financial Asset is to recognize at fairvalue including transaction cost, except where it is designated to profit or loss. Can you explain why we have measured the first question directly through profit or loss at the initial measurement?
August 12, 2019 at 8:31 pm
I think I got it. 🙂
January 18, 2019 at 7:11 pm
Thank you for this lecture. Please see some questions below:
1. In question 2, is there a reason why we did not ‘account’ for the different currencies in this question? (the transaction cost and fair value are shown in GBP, while the initial value of the shares is USD).
2. In question 2, what is the accounting treatment for the subsequent sale of the shares ($650,000)?
March 18, 2019 at 6:41 am
1. Its just a printing mistake & you’ll find similar mistakes in kaplan textbook also.
2. The sale part is quite easy ,you can journalize it yourself.
November 15, 2018 at 2:37 pm
Sir I got the concept but In part b It said 500000 including transaction cost of 40000 so its 500000 which includes the transaction costs so we have to debit 500000 instead of 540000?
December 31, 2018 at 2:45 pm
It says incurring and not including so the costs are an additional amount on top of the $500,000.
October 15, 2018 at 5:10 am
Sir I couldn’t find lecture complete could u explain derecognition of investment…
September 20, 2018 at 1:23 pm
Should there be a part for derecognition too? You mentioned that in the lecture but didn’t cover it or how to show it. There are quite a few things missing throughout these lectures that I’ve noticed so far and worried as we won’t know it for the exam.
August 6, 2018 at 9:18 am
“If you want the journal entries.. you must be crazy” hahahahahahah thank you for making your lectures not boring. I love watching your lectures, I actually pay attention.
August 6, 2018 at 3:27 pm
Glad you’re enjoying the lectures, and if you do ever want the journals then just ask on the forum. Hope you enjoy the rest of the lectures just as much as the ones so far.
October 25, 2018 at 4:17 pm
Hi, where is the rest of this question? The part where the shares are subsequently sold for $650,000…
July 28, 2018 at 10:04 am
When Financial assets have been sold then why profit did not report in SOPL? Why we transfered it into RETAINED EARNINGS / SOCE?
July 28, 2018 at 11:35 am
If we sell an financial asset that has been held at FVTOCI then there are two aspects we need to deal with.
Firstly there is the profit on disposal calculated as the difference between the proceeds and the value of the financial asset held on the SFP, which is recognised through profit or loss.
Secondly there are stored up gains in other components of equity that need to be transferred to retained earnings, as these gains have now been realised.
Hope this helps.
June 18, 2018 at 5:25 pm
Thanks a lot sir for an Amazing set of lectures.
I have got a small doubt…. Apologize if it is silly, but those doubts turning my head round.
I have understood how to calculate (measure) but have still got no clarity where to post it.
Could you please correct me?
Ex 1 part B
On the reporting date of the financial position the investment would value at 620000
As u did in the ppe lectures can you please mention it here …
I mean in this form
June 18, 2018 at 5:26 pm
July 2, 2018 at 8:58 pm
At the reporting date we would have the following:
Financial asset (@FV) $620,000
Gain on FVTOCI (620,000 – 540,000) $80,000
Hope that helps.
May 15, 2019 at 7:17 am
A Co is a subsidiary of B Co, which proposes to demerge an identified business division to B Co.
Under the transaction, the identified business division will be transferred from A Co to B Co through a scheme of demerger approved by the NCLT. As a consideration for demerger, B Co to issue shares to the shareholders of A Co (except B Co).
One of the ingredients as assets of the business being demerged is portfolio investments of the business. The portfolio investment is treated as Fair Value Through Other Comprehensive Income (FVTOCI) in accordance with IndAS 109.
Accordingly, all fair value gains/loss in relation to the investment are recorded in statement of profit and loss account under the head “Other Comprehensive Income (OCI) Items that will not be reclassified to Profit or Loss”.
Illustratively, following is the position in the balance sheet of March 31, 2019 (in relation to the portfolio investment):
• Original acquisition cost: INR 1000
• Fair value gain (accumulated in OCI): Rs 4000
• Book value of investment: Rs 5000
1. In the above scenario what should be the accounting entry A Co should pass in its books for the demerger as a Demerged Company?
2. Through the demerger entries can A Co reverse the fair value gain impact of previous years (which increased the value of the investment) by debiting the head under the statement of profit and loss account “Other Comprehensive Income (OCI) Items that will not be reclassified to Profit or Loss”?
Please answer this question i need its solution urgently ……..
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