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P2-D2.
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Robert
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Hi
Can you clarify the treatment of FV changes taken to the P&L (i.e. on equity investments) in the SOCFs. They appear to be ignored within the adjustments on practice questions but I’m wondering why?My logic is that these do not involve the exchange of cash so why wouldn’t we adjust for these in the SOCFs?
P2-D2
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Hi,
If you look at the entry made for the investments then you will increase/decrease the value of the investments and the other side will go through either profit or loss or other comprehensive income, neither of which involve a cash entry. You do not therefore need to look at any inflow/outflow on the revaluation to FV at the reporting date.
The only time there is a cash impact is on the acquisition or disposal of the equity instrument.
Thanks
Robert
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