Hello tutors,
I am a bit lost on why there are several measrument options for financial assets and liabilities. Can you please explain what are the implications and benefits of particular measurment options - FVTPL, FVTOCI, Amortised costs. E.g. tax implication.
Secondly, does the amortisation cost option mean that gains and losses on debentures measurent go through P&L?
Thank you very much.
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Financial instruments - measurement options
6y ago#1The idea is that:
1. Long term investments in shares are measured at FV, and gains go to OCI (a bit like revaluing PPE)
2. Short term investments in shares are measured at FV, and gains go to P&L (a bit like other current assets)
3. Most debt uses the cost model - however, if the debt is listed on a Stock Exchange, it can be measured at FV
And that's all there is - you are correct that using amortised cost means that gains and losses on debentures will end up in P&L
Tax - ask a tax tutor!
Thank you Stephen, I get the idea better now.
6y ago#3Have a great day
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