JPIA LPU-B

TARA, BYAHE
R. R. OCAMPO

Accounting for Investments in

Equity Instruments

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Investments in FAR Syllabus – Up to May 2022

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Investments in FAR Syllabus – Effec=ve Oct. 2022

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Investments in FAR Syllabus
Up to May 2022 Effec/ve Oct. 2022

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Investments in FAR Syllabus – Effective Oct. 2022

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 <20%

20% - 50%

>50%

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Webinar Objective
At the end of the webinar, the participant will be able to
account for equity investments in accordance with:

PFRS 9 – Financial Instruments (Recognition and Measurement);

PAS 32 – Financial Instruments (Presentation);

PFRS 7 – Financial Instruments (Disclosures); and

PAS 28 – Investments in Associates and Joint Ventures.

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 Financial Instrument
Equity investment
Debt investment
Contract
Derivative

Entity A Entity B
(Holder) (Issuer)

FA FL/Equity

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 Principal = Fair value at ini2al recogni2on

Interest = Return for RT-PCR R – Risk (Credit)

T – Time value
P – Profit margin
C – Costs
R – Risk (Liquidity)
SPPI

Debt only Debt/Equity Debt/Equity

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FA at FVTOCI

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Recognition of Financial Assets

PFRS 9 requires an entity to recognize a financial asset in its

statement of financial position when, and only when, the entity
becomes party to the contractual provisions of the instrument.

Commitment Date Delivery Date

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Regular Way Purchase or Sale of FA

Regular way purchase or sale is a purchase or sale of a financial

asset under a contract whose terms require delivery of the asset
within the time frame established generally by regulation or
convention in the marketplace concerned.

Change in fair value

Commitment Date End of Repor2ng Delivery Date

Period

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Regular Way Purchase or Sale of FA

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 P500

P101,500

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Presenta<on of Financial Assets

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Disclosures

PFRS 7 requires entities to provide disclosures in their financial

statements that enable users to evaluate:

• The significance of financial instruments for the entity’s

financial position and performance.

• The nature and extent of risks arising from financial

instruments to which the entity is exposed during the period
and at the end of the reporting period, and how the entity
manages those risks.

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 <20%

20% - 50%

>50%

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 Fair value (20,000 x P110) = P2,200,000

W/ SI
No FV

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 P/L

OCI

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 FVTPL
Dividend income
(P12,500 x .2) P2,500
FV adj.
[10,000 x (P6.50 – P6)] 5,000
P7,500
FVTOCI
Dividend income P2,500

Associate
Share of profit
(P3,000 x 7 x .2) P4,200

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 Journal entry – transfer to FVTOCI

Equity inv.-FVTOCI P237,000

Equity inv.-Associate P193,500
FV adj. gain (P/L) 43,500

Cost P360,000
SOPA - 2019 (P150T x .3) 45,000
Dividends - 2019 (P90T x .3) ( 27,000)
CA, 12/31/19 378,000
SOPA, up to 7/1/20
(P180T x 6/12 x. 3) 27,000
Dividends, 4/1/20
(P60T x .3) ( 18,000)
CA, 7/1/20 P387,000

Sales proceeds P237,000

CA of investment sold
(P387,000 x ½) (193,500)
Gain on sale P 43,500

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 Gain on sale (#1) P 43,500
Remeasurement gain (#2) 43,500
SOPA, up to 7/1/20 (#1) 27,000
Dividends received, 10/1/20
(P60,000 x .15) 9,000
Total amount in 2020 P/L P123,000

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Associate Classified as ‘Held for Sale’

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 FROM TO STANDARD

Associate Financial asset PAS 28

(Equity) (Fair value)

Financial asset Associate ?

(Fair value) (Equity)

PFRS 9 PAS 28 PFRS 3 (Analogy)

PIC Q&A 2018-07

PIC Q&A 2018-07

Amended

PIC Q&A 2019-06

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InvesPng in Associate in Stages (Step AcquisiPon)

PIC Q&A 2018-07 before amendment Existing investment reset to cost,

- Accumulated cost approach adjustment to retained earnings

PIC Q&A 2018-07 as amended by 2018-13

(same with PFRS 3)
Amount recognized in OCI ‘should’ be
- Fair value as deemed cost approach transferred to RE

PIC Q&A 2019-06 (Effective 10/9/19)

Amount recognized in OCI ‘may’ be
- Fair value as deemed cost approach transferred to RE

- Accumulated cost approach Existing investment reset to cost,

adjustment to profit or loss

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 Journal entries - 2019

Acquisi/on
Equity inv. – FVTOCI P2M
Cash P2M

Share of profit
(P2M x .15 = P.3M)
No entry

Dividends
(P1M x .15 = P.15M)
Cash P.15M
Dividend income P.15M

FV adjustment
(P2.7M – P2M = P.7M)
Equity inv. – FVTOCI P.7M
FV adj. gain – OCI P.7M

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 Journal entries - 2020
Acquisition

FV of 15% interest P2,700,000

Consideration given (25%) 4,500,000
Cost of investment in assoc. P7,200,000

Equity inv. – Assoc. P7.2M +

Cash P4.5M
Equity inv. – FVTOCI 2.7M
CA of NA acquired (P13M x .4) = P5.2M FV adj. gain – OCI P.7M
Retained earnings P.7M
Share of profit
(P5M x .4 = P2M)
Equity inv. – Assoc. P2M +
SOPA P2M
Dividends
(P1.5M x .4 = P.6M)
Cash P.6M
Equity inv. – Assoc. P.6M -
FV adjustment
No entry

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 Journal entries - 2020
Acquisition

Cost of 15% interest P2,000,000

Consideration given (25%) 4,500,000
Cost of investment in assoc. P6,500,000

Equity inv. – Assoc. P6.5M +

Adj. to cost of E.I. (P/L) .7M
Cash P4.5M
Equity inv. – FVTOCI 2.7M
FV adj. gain – OCI P.7M
Retained earnings P.7M
Share of profit
(P5M x .4 = P2M)
Equity inv. – Assoc. P2M +
SOPA P2M
Dividends
(P1.5M x .4 = P.6M)
Cash P.6M
Equity inv. – Assoc. P.6M -
FV adjustment
No entry

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Thank you! ❤

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