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Dear Chris,
First of all I would like to thank you for your clear and concise lectures.
As per the answer on the lecture, the acquisition (on 1 March 2015) of shares is measured as FV through OCI because as per question narrative there is a “long term strategy to realise gains in the future”
However, shares are sold on 1 January 2016 (only 9 months after acquisition)
If I were to explain the transaction, would it be incorrect to say that despite the fact that there was a long term strategic intention to hold the investment it was actually sold in less than 12 months after its purchase.Therefore, there was an intention to trade with the investment, ie, it should be Initially recognised as FV through PL?
Thank you in advance for your reply,
Kind regards,
Isabel
Hi Isabel,
Thank you so much for the kind comment with regards the lectures. We do out best to help you all out and it is nice to be appreciated.
The initial recognition is done when the asset is initially purchased and based upon the intent at that date. If the intent then subsequently changes then we would not make any adjustments to the initial classification.
It might be considered as an audit issue if there were several of this type of financial asset that were sold relatively quickly after the initial recognition as FVTOCI.
Hope the studying is going well.
Thanks
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