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I was wondering about the so-called “Available For Sale” Investments. A search I performed in the text of the relevant IFRSs (IAS 32, IAS 39, IFRS 7 and IFRS 9) did not produce any results which is quite embarrassing. The closest thing I could get to is a Financial Asset that is an equity instrument and classified as FVTOCI; the gains and losses are recognised in a reserve in OCI and not in Profit or Loss.
Still, I don’t understand how previous reserves from gains on the investments are treated in case of disposal of these FVTOCI investments. Are they recycled through Profit or Loss or just moved from the reserve to Retained Earnings?
Your assistance would be more than gratefully appreciated!
did you watch the lecture that deals with this question?? there is a whole list of revision video lectures
https://opentuition.com/acca/f7/acca-f7-december-2009-question-2-sandown/
I certainly did watch the lecture and this is how this issue came to my attention.
I have tried to find information about Available for Sale (AFS) investments but the subject is not mentioned in IAS 32/39 nor in IFRS 7/9. Financial assets classified at Fair Valule through Other Comprehensive Income (FVTOCI) is what most resembles AFS investments but I don’t understand how to treat already accrued existing reserves from gains on these FVTOCI investments in the case of selling them or disposing them:(a) Are we allowed to “recycle” those reserves In the Income Statement, thus increasing profit for the year or
(b) Recycling should be done only through Other Comprehensive Income, that is my a movement from the reserve to Retained Earnings?In essence my question is this: if the above question – SANDOWN – was repeated in the June 2013 exams,
(i) would it still refer to AFS investments or to FVTOCI financial assets?
(ii) what would the treatment of existing reserves from past gains on this FVTOCI investment would be? Recycling through income, as the aforementioned lecture suggests, or through equity only i.e. be way of a transfer to Retained Earnings?Thanks in advance!
Hi
If it’s an asset held for sale – should you not be looking in IFRS 5?
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