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IFRS 9: Financial instrument (FVTOCI)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › IFRS 9: Financial instrument (FVTOCI)

  • This topic has 1 reply, 2 voices, and was last updated 3 months ago by Stephen Widberg.
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  • Author
    Posts
  • March 1, 2022 at 5:36 pm #649582
    mmmhhh
    • Topics: 4
    • Replies: 0
    • ☆

    Hi,

    Q1) Are we in general re-measured FVTOCI investments to their fair value prior to a sale?

    ———–

    Investment in equity instruments (FVTOCI):

    Q2) Must fullfill both of the followings?
    Not held for trading;
    AND held for the long-term

    Q3) Derecognition of the Equity instrument (i.e: All shares were sold)
    Which method is correct?

    Method 1
    Gain on disposal of shares 3k, OCI gains on revaluation 5k:
    1) Dr Cash 3k, Cr SPL 3k
    2) A reserve transfer: Dr OCI Revaluation/Accumulated gains 5k, Cr Retained earning 5k

    Method 2
    Dr Cash 3k, Cr OCI 3k
    OCI (Gains on revaluation) – Do nothing.

    ———————-

    Investment in Debt (FVTOCI)

    Q4) Derecognition of the Bond, are the below entries correct?

    Gain on disposal of bonds 3k, OCI gains on revaluation 5k:
    1) Dr Cash 3k, Cr OCI 3k
    2) A reserve transfer: Dr OCI Revaluation/Accumulated gains 8k (5+3), Cr Retained earning 8k

    Any assistance you can provide would be greatly appreciated!

    March 2, 2022 at 10:43 am #649635
    Stephen Widberg
    Moderator
    • Topics: 10
    • Replies: 2523
    • ☆☆☆☆☆

    Q1. Yes
    Q2. Not held for trading AND irrevocable election.
    Q3. Method 2. ASSUMING THERE ARE NO DISPOSAL COSTS WHICH MUST BE EXPENSED IN P&L. Note that the 5 transfer is within reserves and does NOT hit the P&L for the year.
    Q4. Step 1 OK. Step 2 NOT OK – you Dr OCI and Cr P&L (changing reported profit for year; not a simple reserve transfer).

    ONE QUESTION PER POST IN FUTURE PLEASE 🙂

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