BPP : Minny (12/12)

Dear Sir,

“Minny acquired a 14% interest in Puttin, a public limited company, on 1 Dec 20X0 for a cash consideration of $18m. The investment was accounted under IFRS 9 Financial Instruments and was designated as at fair value through other comprehensive income. On 1 June 20X2, Minny acquired an additional 16% interest in Puttin for a cash consideation of $27 million and achieved significant influence. The value of the original 14% investment on 1 June 20X2 was $21million. Puttin made profits after tax of $20 million and $30 million for the years to 30 Nov X1 and 30 Nov X2 respectively. On 30 Nov X2, Minny received a dividend from Puttin of $2 million which has been credited to OCE.

1) What does they mean by “fair value through other comprehensive income” in the above qns?

2) I do not understand the answer given :

“The investment had been designated as being at fair value through other comprehensive income. The gain of $21m – $18m = $3m now realised is not reclassified to P/L for the year, but may be transferred as a reserve movement from OCE to RE.”

3) To find investment in associates, they deducted dividends paid? Why is it so? I thought the formula for investment in associates : Cost of investment in associates + Share of Profits – impairment since acqusition? Is it any intra group dividends paid between subsidiary and associate must be eliminated and thus therefore, they deducted dividends paid?

Hope you can enlighten me as i have been figuring out the answers but i do not understand them.

Many thanks!