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Hi sir, there is this f7 question:
In February 20X8 a company purchased 20,000 $1 listed equity shares at a price of $4 per share.
Transaction costs were $2,000. At the year end of 31 December 20X8, these shares were trading at $5.50.
A dividend of 20c per share was received on 30 September 20X8.
Show the financial statement extracts at 31 December 20X8 relating to this investment on the basis that conditions for FVTOCI have been met.For the SOPL, I understood that it is
dividend income : 20cents x 20,000
and then under the OCI
(5-4.4) x 20,000 = 30,000but I do not understand why in the SOFP it is recorded only as 5.5 x 20,000
instead of 5.5 x 20,000 + 2,000?
I thought financial assets recognition is FV + transaction cost..
Thank you sir.
For initial recognition, all financial instruments are measured at fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs
But, for subsequent recognition of equity instrument investments, these are to be measured at fair value in the statement of financial position, with value changes recognised in profit or loss. There is, though, the exception for those equity investments for which the entity has elected to present value changes in ‘other comprehensive income’ as appears to be the case in your post
Incidentally, I don’t understand this line from your post:
“and then under the OCI
(5-4.4) x 20,000 = 30,000”This makes no sense at all to me 🙁
OK?
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