Investment in Equity Securities

Equity Securities- Investments held by a company to secure income arising from dividends changes in
fair value or to hold a strategically important proportion of shares for future acquisition plans

FVPNL

Equity securities held through Fvpnl are either trading or non trading that has a principal purpose of
being sold and earning income from short term fv changes gains on fv changes and dividends are close
to pnl because it is really intended to augment operations cost incurred in acquisition are expensed as
incurred

FVOCI

Equity securities which are either held for dividends as income or for strategic purposes

Changes in FV are closed to OCI due to the fact that these are long term investments either for future
acquisition or for cashflows from dividends and dividends are closed to pnl because they are income and
earned for the current period costs incurred in acquisition are capitalised

Reclassification Rules

Once elected to fvpnl or fvoci you cannot reclassify it as per IFRS 9

Acquisition of Significant Influence

Generally speaking a reasonable significant influence threshold would be the acquisition of at least 20%
of the outstanding shares of a company, but it could be less than 20% for as long as the holder could
influence the operations of the company it is still considered significant influence take note that one can
only recognise an investment in associate account if one has the intention of keeping the interest for
more than 12 months

Usual acquisition would be a one time purchase of the required numbers of shares to have SI
In that case the cost of the Investment in

Associate account would be the payment made

Pro Forma Entry

Inv. In Assoc xxxx

Consideration Transfered xxxxx

There is Existing Interest FVPNL

Update the FV of the FVPNL securities and close the difference to pnl plus apply the preceding
procedure

Entry

Update

Fin Assets FVPNL. xxxx

Gain in FVPNL Sec xxxx

Reclassification

Inv in Asoc. xxxx

FVPNL. xxxxx

Con. Trans. xxxxx

Existing interest in FVOCI

Update the FV of Equity through Fvoci and close the Unrealized gain to RE then for the additional
acquisition apply the first procedure

Update

Equity Sec through Fvoci xxxxx

Unrealized gain fvoci. xxxx

Reclassification

Investment in Assoc. xxxx

Unrealized gain FVOCI. xxxx

Equity Sec FVOCI xxxx

RE. xxxx

Cons Transfered. xxxx

For accounting for the income in the inv in associate one should use the equity method in which
proportionate share in the operating net income that is adjusted from the under and over valuation of
assets and proportionate share in the oci adjustments are considered as an increase to the investment
in assoc account while dividends declared are considered as a deduction losses would be considered
deductions and the entity