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FVOCI equity instrument

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › FVOCI equity instrument

  • This topic has 1 reply, 2 voices, and was last updated 4 years ago by Stephen Widberg.
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  • March 29, 2021 at 10:55 am #615449
    Noah098
    Member
    • Topics: 935
    • Replies: 352
    • ☆☆☆☆☆

    “Aron held 3% holding of the shares in Smart, a public limited company. The investment was designated upon recognition as fair value through other comprehensive income and as at 31 May 20X7 was fair valued at $5 million. The cumulative gain recognised in equity relating to this investment was $400,000. On the same day, the whole of the share capital of Smart was acquired by Given, a public limited company, and as a result, Aron received shares in Given with a fair value of $5.5 million in exchange for its holding in Smart.
    The company wishes to know how the exchange of shares in Smart for the shares in Given should be accounted for in its financial records.”

    Sir how on the earth could the gain of $0.5m go in SPL??? If the shares are held at FVOCI then we will revalue the shares immediately before sale and transfer the $0.5m in OCI.

    But apparently the entry passed in my kaplan exam kit is,
    Dr. Cash $5.5m
    Cr.SPL $0.5m
    Cr. FA $5m

    March 29, 2021 at 11:17 am #615453
    Stephen Widberg
    Keymaster
    • Topics: 16
    • Replies: 3411
    • ☆☆☆☆☆

    Question states that FV is 5 – so the asset has already been revalued to FV

    It is then sold ABOVE FV – the gain can go to P&L

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