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Dear sir, I have 1 question, please help me to explain.On 1/1/20X0 a company purchase 40,000 $1 listed equity at a price of 3 per share.Fair value will be recognized through OCI . Transaction cost 3,000.On 31/12/20X0 share were trading at $6share.What amount of investment in equity instrument in the SOFP at 31/12/20X0?The answer is 240.000, but i do not understand why not 270.000?Thank you
Hi,
The value peer share is 6 at the reporting date and we own 40,000 of them. The 240,000 is the 40,000 multiplied by 6.
Thanks
Dear sir, i understand that Transaction cost will be recognized to Dr investment in equity.So the ending balance of equity instrument should be include 30.000?Thank you.
I think that the transaction cost will be recorded in the value of the investment on 1/1/20X0. As on 31/12/20X0, the share price is 6$ per share so the value of investment on SOFP will be 240000$. The gain will go in OCI as I think the Financial asset is treated under FVOCI
Hi,
Yes, that is correct. We have recorded the fair value at acquisition, which takes into consideration the transaction cost. We now have the fair value at the reporting date (SFP), which we then compare to the value recorded at the acquisition date to get the movement that goes through profit or loss.
Thanks
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