The document defines investments as assets held by an entity to generate wealth through means such as interest, dividends, and rentals. Investments are not directly involved in the core revenue-generating activities of the entity. The main reasons entities hold investments are to generate regular income, achieve capital appreciation, gain ownership control, meet business requirements, and gain protection. There are various kinds of investments including equity securities, bonds, investment property, funds, and joint ventures. Financial assets are considered "held for trading" if they are acquired to sell in the near term, are part of a portfolio managed for short-term profit taking, or are derivatives.
Copyright:
Attribution Non-Commercial (BY-NC)
Available Formats
Download as DOC, PDF, TXT or read online from Scribd
The document defines investments as assets held by an entity to generate wealth through means such as interest, dividends, and rentals. Investments are not directly involved in the core revenue-generating activities of the entity. The main reasons entities hold investments are to generate regular income, achieve capital appreciation, gain ownership control, meet business requirements, and gain protection. There are various kinds of investments including equity securities, bonds, investment property, funds, and joint ventures. Financial assets are considered "held for trading" if they are acquired to sell in the near term, are part of a portfolio managed for short-term profit taking, or are derivatives.
The document defines investments as assets held by an entity to generate wealth through means such as interest, dividends, and rentals. Investments are not directly involved in the core revenue-generating activities of the entity. The main reasons entities hold investments are to generate regular income, achieve capital appreciation, gain ownership control, meet business requirements, and gain protection. There are various kinds of investments including equity securities, bonds, investment property, funds, and joint ventures. Financial assets are considered "held for trading" if they are acquired to sell in the near term, are part of a portfolio managed for short-term profit taking, or are derivatives.
Copyright:
Attribution Non-Commercial (BY-NC)
Available Formats
Download as DOC, PDF, TXT or read online from Scribd
The document defines investments as assets held by an entity to generate wealth through means such as interest, dividends, and rentals. Investments are not directly involved in the core revenue-generating activities of the entity. The main reasons entities hold investments are to generate regular income, achieve capital appreciation, gain ownership control, meet business requirements, and gain protection. There are various kinds of investments including equity securities, bonds, investment property, funds, and joint ventures. Financial assets are considered "held for trading" if they are acquired to sell in the near term, are part of a portfolio managed for short-term profit taking, or are derivatives.
Copyright:
Attribution Non-Commercial (BY-NC)
Available Formats
Download as DOC, PDF, TXT or read online from Scribd
Download as doc, pdf, or txt
You are on page 1/ 2
Investments Defined
- Investments are assets held by an entity for the accretion of wealth
through distribution such as interest, royalties, dividends and rentals, for capital appreciation or for other benefits to the investing entity such as those obtained through trading relationships
- Actually, they are not directly identified with the operating activities of an entity and occupy only an auxiliary relationship to the central revenue producing activities of the entity.
Various reasons why investments are held by entities:
1. For accretion of wealth through receipt of regular income (e.g.
interests, dividends, royalties and rentals)
2. For capital appreciation (real estate held for appreciation and direct investment in gold, diamonds and other precious commodities)
3. Ownership control
4. Meeting business requirements (sinking fund, preference redemption
fund and plant expansion fund)
5. For protection (cash surrender value)
Kinds of Investments:
1. Investment in equity securities
Without significant influence (below 20% ownership):
a. Financial assets at fair value through profit or loss (Fair Value
Method)
b. Financial assets at fair value through other comprehensive
income (Fair Value Method)
c. Investment in unquoted equity instruments (Cost method)
With significant influence (20% to 50% ownership):
d. Investment in associate (Equity method)
With controlling interest (above 50% ownership):
e. Investment in subsidiary (Business Combination)
2. Investment in bonds
a. Financial assets at fair value
b. Financial assets at amortized cost
3. Other investments
a. Investment property
b. Investment in fund
c. Investment in joint venture
Financial asset held for trading
PAS 39, paragraph 9, as consequentially amended by PFRS 9, provides that
a financial asset is held for trading if:
a. It is acquired principally for the purpose of selling or repurchasing it in
the near term.
b. On initial recognition, it is part of a portfolio of identified financial
assets that are managed together and for which there is evidence of a recent actual pattern of short-term profit taking.
c. It is a derivative, except for a derivative that is a financial guarantee
contract or a designated and an effective hedging instrument.
