Dear Sir,
I have come across this question from DEC 2009 qn no 2)
Profit on sale of investments (note (iv)) 2,200
Available-for-sale investments (note (iv)) 26,500
Other reserve (note (iv)) 5,000
Note iv)
During the year Sandown sold an available-for-sale investment for $11 million. At the date of sale it had a carrying amount of $8·8 million and had originally cost $7 million. Sandown has recorded the disposal of the investment. The remaining available-for-sale investments (the $26·5 million in the trial balance) have a fair value of $29 million at 30 September 2009. The other reserve in the trial balance represents the net increase in the value of the available-for-sale investments as at 1 October 2008. Ignore deferred tax on these transactions.
The NCA held for sale investment should be valued at lower of Carrying Value or Fair value less cost to sell. But the answer provided there is done differently. Can you please explain how the above scenario is treated in the financial statements?
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NCA held for sale
Hi,
This question has old terminology in it so be careful. For AFS think FVTOCI.
It is an investment is shares and so will be measure at fair value at the reporting date with gains/losses through OCI.
Thanks
So it is actually an investment in equity (IFRS 9) which has been held for sale but not NCA- held for sale (IFRS 5)? And should be treated according to IFRS 9 ?
Thank you Sir.
Yes, that's correct. The old treatment for AFS was pretty much the same as it is now for FVTOCI financial assets. Recognise initially at fair value plus transaction costs, revalue at the reporting date to fair value with gains and losses through OCI. The difference now is that gains held in reserves are not recycled through profit or loss.
Thanks
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