Equity Instruments

Non-Strategic Investment Strategic Investment

Hold less than 50% of shares, generate Hold more than 20% of shares, part of
investment income, and are not part of the operating stratigy, control of another company
operation strategy.
Significantly influenced companies Joint Venture (50% by Two 2 Subsidiaries (more then
Hold For Trading (Less then 20% Available for Sale (transaction cost Held for (more than 20%—less than 50%)
-short-term marketable Maturity Investors) Accounting method: 50%) Accounting method:
added or not added to investment Accounting method: equity method
securities) Proporation consolidation full consoidation
cost)

1. Recognize fair value 1. Initial recognition at a cost

Accounting method: fair Value Allow the investor to The investor will have
method with changes in net income share control of the voting rights and
2. Transaction costs 2. The profit or loss will control over operating
investment with
recognize net income. increase or decrease the and financing
Quoted Market another investor. The
Without Quoted investment. decisions.
Price investor is referred to
Market Price as a joint venture.
3. Investments are shown at
fair value on the balance 3. The dividend paid will
sheet. Accounting Method: Accounting describe the investment
Fair value with other Method: Cost (the investment is referred
4. Changes in fair value are comprehensive Method to as an associate or
shown in net income. income. affiliate).

1. If dividends are
1. Investment paid with no net
value shown in profit, they are
the balance sheet treated as a return
of capital.
2. changes in fair
value shown in
OCI 2. If dividends are declared from
retained earnings, they are deducted
3. Dividends are from retained earnings, and the
included in net remaining balance is treated as a
income. return on capital.

4. On sale, OCI is
transferred to net
income.