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    Chapter 4 - Robles

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    Yesha Sibayan
    The document discusses accounting for financial instruments and equity investments. It defines key terms like financial assets and liabilities. It outlines the classification and measurement of financial assets, including initial and subsequent measurement. It provides examples of journal entries for investments in equity securities, associates, and subsidiaries. The learning objectives cover these topics as well as reclassification of investments.

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    © All Rights Reserved
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    Chapter 4 - Robles

    Uploaded by

    Yesha Sibayan
    61 views18 pages
    The document discusses accounting for financial instruments and equity investments. It defines key terms like financial assets and liabilities. It outlines the classification and measurement of financial assets, including initial and subsequent measurement. It provides examples of journal entries for investments in equity securities, associates, and subsidiaries. The learning objectives cover these topics as well as reclassification of investments.

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    Chapter 4_Robles

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    The document discusses accounting for financial instruments and equity investments. It defines key terms like financial assets and liabilities. It outlines the classification and measurement of financial assets, including initial and subsequent measurement. It provides examples of journal entries for investments in equity securities, associates, and subsidiaries. The learning objectives cover these topics as well as reclassification of investments.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    61 views18 pages

    Chapter 4 - Robles

    Uploaded by

    Yesha Sibayan
    The document discusses accounting for financial instruments and equity investments. It defines key terms like financial assets and liabilities. It outlines the classification and measurement of financial assets, including initial and subsequent measurement. It provides examples of journal entries for investments in equity securities, associates, and subsidiaries. The learning objectives cover these topics as well as reclassification of investments.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 18

    Learning Objectives:

    1. Recall the concept of financial instrument


    2. Classification of financial Assets
    3. Measure the investment in equity securities at the date of initial recognition and subsequent to acquisition.
    4. Prepare the necessary journal entries to account investment in equity securities
    5. Apply the principles for reclassification of investment in equity securities

    Financial Instrument = Financial Asset (One Entity) + Finanical Liabiltiy or Equity (Another Entity)

    FINANCIAL INSTRUMENT

    FINANCIAL ASSET FINANCIAL


    LIABILITIES O
    (ONE ENTITY) EQUITY
    (ANOTHER ENTIT

    CLASSIFICATION OF FINANCIAL ASSETS


    1. Amortized cost; AC
    2. Fair value through other comprehensive income (FVOCI); or
    3. Fair value through profit or loss (FVPL)

    Initial Measurement
    Financial Assets are initially measured at fair value plus transaction cost except FVPL. Financial assets classified as F

    Subsequent Measurement
    Financial Assets are subsequently measured at
    a. Amortized cost
    b. FVPL
    c. FVOCI

    PERCENTAGE OF OWNERSHIP TYPE OF INVESTMENT


    Less than 20% Financial Assets at fair value
    20%-50% Investment in associate
    More than 50% Investment in subsidiary
    Contractually agreed sharing of controInvestment in joint venture

    EQUITY INVESTMENTS
    Equity investments and derivatives must always be measured at fair value and the general classification category is FV
    However, PFRS 9 permits entities to irrevocably elect to classify certain equity investments that are not held for tradi

    INVESTMENT IN ASSOCIATE

    Initial Recognition
    Investment in Associate xx
    Cash xx

    Dividends
    Cash xx
    Investment in Associate xx

    Share in Profit
    Investment in Associate xx
    Share in Profit/Loss of Associate xx

    Share in Loss
    Share in Profit/Loss of Associate xx
    Investment in Associate xx
    ent to acquisition.

    FINANCIAL
    LIABILITIES OR
    EQUITY
    (ANOTHER ENTITY)

    ancial assets classified as FVPL are initially measured at fair value and the transaction costs are expense immediately.
    lassification category is FVPL. (DEFAULT CLASSIFICATION)
    s that are not held for trading as FVOCI. 
    mmediately.
    Year 1
    Equity Investment - FVPL 150000
    Other Expense 3750
    Cash 153750

    Year-end
    Equity Investment - FVPL 30000
    Unrealized Gain on Equity Investment - PL 30000

    Year 2
    Cash 94000 Proceeds
    Equity Investment - FVPL 90000 Less: Transaction Costs
    Gain on Sale of Equity Investment - FVPL 4000 Net Proceeds
    CV of Equity Investment-FVPL
    Year -end Gain on sale
    Equity Investment - FVPL 6000
    Unrealized Gain on Equity Investment - PL 6000
    95000
    1000
    94000
    90000
    4000
    Year 1
    Equity Investment - FVOCI 153750
    Cash 153750

    Year-end
    Equity Investment - FVOCI 26250
    Unrealized Gain on Equity Investment - FVOCI 26250

    Year 2
    ADJUSTMENT
    Equity Investment - FVOCI 10000
    Unrealized Gain on Equity Investment - FVOCI 10000

    Cash 94000
    Loss on sale of Equity Investment -FVOCI 1000
    Equity Investment - FVOCI 95000

    Unrealized Gain on Equity Investment - FVOCI 18125


    Retained Earnings 18125

    Year-end
    Equity Investment - FVOCI 1000
    Unrealized Gain on Equity Investment - FVOCI 1000
    Proceeds 95000
    Less:Transaction Cost 1000
    Net Proceeds 94000
    CV of Equity Investment - FVOCI sold 95000
    Loss on Sale -1000
    a. Cash 18000
    Dividends Income 18000

    b. Memo entry

    c. Equity Investment - Preference 150000


    Dividends Income 150000

    d. Memo entry

    e. Equity Investment - C Company 20000


    Dividends Income 20000
    1 Investment in Associate 2000000
    Cash 2000000

    2 Investment in Associate 300000


    Share in Profit/Loss of Associate 300000

    3 Memo entry

    4 Investment in Associate 600000


    Share in Profit/Loss of Associate 600000

    5 Cash 200000
    Investment in Associate 200000

    Carrying amount of Investment in Associate, 12/31/2021 2700000


    1-Jan-20
    Investment in Associate 5160000
    Cash 5160000

    31-Dec-20
    Investment in Associate 1080000
    Share in Profit/Loss of Associate 1080000

    Cash 120000
    Investment in Associate 120000

    CV of Investment in Associate, 12/31/2022 6120000

    Dividends income to be recognized in Profit/Loss 0


    1-Mar-20
    Investment in Associate 1365000
    Cash 1365000

    31-Dec-22
    Cash 240000
    Investment in Associate 240000

    Investment in Associate 300000


    Share in Profit/Loss of Associate 300000

    Share in Profit/Loss of Associate 52500


    Investment in Associate 52500 Undervalued - Inventory
    Undervalued - depreciable asset
    Annual (750000/5)*10/12
    CV of Investment in Associate 1372500 Total

    Income reported by Baribie, 2020 247500


    15000

    37500
    52500
    YEAR 1
    1-Jan Equity Investment - FVOCI 900000 Year 1 - FVOCI
    Cash 900000 Year2 - investment in associate

    31-Dec Cash 200000


    Dividends Income 200000

    Equity Investment - FVOCI 480000


    Unrealized Gains/Losses on EIFVOCI 480000

    YEAR 2
    2-Jan Investment in Associate 1380000
    Equity Investment - FVOCI 1380000

    Unrealized Gains/Losses on EIFVOCI 480000


    Retained Earnings 480000

    Investment in Associate 2600000


    Cash 2600000

    31-Dec Cash 900000


    Investment in Associate 900000

    Investment in Associate 1950000


    Share in Profit/loss of Associate 1950000

    CV of Investment in Associate, Year 2 5030000


    vestment in associate
    Year 1
    1-Jan Investment in Associate 8250000 0.25
    Cash 8250000

    1-Aug Cash 210000


    Investment in Associate 210000

    31-Dec Investment in Associate 170000


    Share in Profit/Loss of Associate 170000

    Year 2
    31-Dec Cash 240000
    Investment in Associate 240000

    Investment in Associate 250000


    Share in Profit/Loss of Associate 250000

    CV of Investment in Associate 8220000 50000shares

    Year 3
    2-Jan Cash 3500000 Proceeds
    Investment in Associate 3288000 CV of IA-sold shares
    Gain on Sale of Investment 212000 Gain on Sale of Investm

    Ownership
    sold shares
    Remaining shares
    ownership

    3500000
    3288000
    212000

    50000 25%
    20000
    30000 15% FVOCI

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