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Hi Mr. MikeLittle
I have a question about Fin Instruments1 Jan 2008 company purchased 40000 1$ listed equity shares at 3$. An irrevocable election was made to recognize the shares at fair value through OCI . transaction cost was 3000$. at the year-end 31 Dec 2008 shares were costing 6$ per share.
What amount will be shown unver investment in equity instruments in Balance sheet?we have already known that equity instruments are classified as measured at FV through profit and loss. but it was given in example it was through OCI. therefore we add transaction cost to the amount of 40000*6=240000$ which will be shown under the equity in investments securities in a balance sheet.
But it couldnt added transaction cost why??????because of shares were trading? and if the answer is 240000$ why they have given us this keyword OCI??
Upon initial recognition, the transaction costs will be included within the asset valuation ($123,000)
At the year end, that investment is now worth $240,000 and that’s the figure that will appear on the statement of financial position
The difference between initial recognition and subsequent year end valuation $117,000 ($240,000 – $123,000) will be credited within Other Comprehensive Income
Does that explain it? Those transaction costs are included for the purposes of initial recognition and then, subsequently, for determining gains / losses to go through OCI
OK?
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