Investment in Securities (Notes)

Financial Accounting 2
Investment in Securities IFRS 9 (Financial Instruments) & IAS 28

(Investment in Associates)
Figure 1: Classifications of Investment Securities
at Fair Value
through Profit or
Loss (FVPL)
at Fair Value
through Other
Comprehensive
income (FVOCI)
Equity Securities
Investment in
Associate
Investment in
Securities
Investment in
Subsidiaries
at Amortized cost
Debt Securities
at Fair Value
through Profit or
Investment in Equity Securities
Loss
Equity securities that provide neither control nor significant influence over
the investee are measured at fair value.
(1) Equity securities at fair value through Profit or Loss (ESFVPL)
(2) Equity securities at fair value through Other comprehensive income
(ESFVOCI)
Figure 2: Designation as to whether the equity investment is at FV through P/L or

OCI
Trading
Investment in
Equity securities
held for
at Fair Value
through Profit or
Loss (FVPL)
at Fair Value
through Profit or
Loss (FVPL)
Non-Trading
1
at Fair Value
through Other
Comprehensive
Income (FVOCI)
If the securities are non-trading, the enterprise shall make an

irrevocable choice of designating them at FVPL or at FVOCI on the
date of initial recognition. (GENERALLY at FVOCI)
Recognition principles:
1. EQUITY INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
(ESFVPL)
Measured at initial recognition and at each reporting date at fair
value.
Transaction costs at initial recognition do not form part of initial
cost and are charged to expense.
At reporting date, the investment shall be adjusted to fair value.
Any change in fair value is taken as income or loss in profit or
loss. Unrealized Gain (Loss) P/L
Any difference between the net disposal proceeds and the
carrying value of the investment is recognized as gain or loss in
the profit or loss section of the statement of comprehensive
income.
2. EQUITY INVESTMENTS AT FAIR VALUE THROUGH OTHER
COMPREHENSIVE INCOME (ESFVOCI)
The investment shall be recorded upon acquisition at purchase
price plus directly attributable transaction costs.
Any change in fair value of the investment during the period is
taken to other comprehensive income in the statement of
comprehensive income. Unrealized Gains and Losses on Equity
investments OCI
carrying value of the investment is recognized as gain or loss in
the OCI section of the statement of comprehensive income.
The cumulative balance of Unrealized Gains and Losses on Equity
investments OCI is not subsequently reversed in profit or loss.
However, the entity may transfer it within equity. (OCI
Retained Earnings)
3. INVESTMENT IN ASSOCIATES
If the entity holds 20% or more of the voting power of the
investee, it is presumed that the investor has significant
influence, unless it can be clearly demonstrated that this is not
the case.
Initially recognized at purchase price plus transaction costs.
Equity method is used to account for this type of investment.
The carrying amount of the investment is adjusted to recognize

the investors share in profit or loss of the investee after the date
of acquisition.
Dividends received or receivable from an investee represents
return on investment and, therefore, reduces the carrying
amount of the investment.
Any further excess of the cost of investment and the investors
share of the fair values in net identifiable assets of the associate
at the date of the acquisition of the investment is attributable to
goodwill.
carrying value of the investment using the equity method is
recognized as gain or loss in the profit or loss section of the
statement of comprehensive income.
Not adjusted to FMV every year-end.
Reclassification:
1. Investment in Associate ESFVOCI (or ESFVPL), the difference
between the fair value and its carrying value is gain or loss reported in
profit or loss.
2. ESFVPL (or ESFVOCI) Investment in Associate, update first the
carrying value to fair value (the difference will go to P/L if from ESFVPL,
and to OCI if from ESFVOCI).
3. ESFVPL ESFVOCI (or vice versa), Not allowed.
Financial Statement presentation
1. ESFVPL (or Trading Securities) Current Assets
2. ESFVOCI generally classified as Non-Current Assets
3. Investment in Associate Non-Current Assets
Percentage of ownership
1. ESFVPL and OCI less than 20%
2. Investment in Associate 20% - 50%
3. Investment in Subsidiary more than 50%
Investment in Debt Securities
Recognition principles:
1. INVESTMENT IN DEBT SECURITIES AT AMORTIZED COST
Initially measured at purchase price plus transaction costs.
Original cost > Face value, PREMIUM
Original cost < Face value, DISCOUNT
The premium or discount is not recognized separately, but rather
included as part of the investment cost or netted against the
investment cost.
3
Purchase of bonds between interest payment dates

The buyer should pay the amount of accrued interest from the last
interest payment date. (For example, Interest is to be paid every
December 31. On March 1, Y2, an entity purchased the bonds. The
entity shall pay an additional amount equal to 3 month interest
[from December 31 February 28])
2. INVESTMENT IN DEBT SECURITIES AT FAIR VALUE THROUGH PROFIT OR
LOSS
Initially recognized at purchase price. Transaction costs are taken to
profit or loss.
Discount and premium are not amortized.
ACCOUNTING FOR INVESTMENTS UNDER IAS 39

Figure 3: Classification of Securities under IAS 39
Equity Securities
Financial Assets
at fair value
through profit or
loss
Available for
Sale equity
instruments
Debt investment
at Fair value
through Profit or
Loss
Securities
Debt Securities
Available for
Sale securities
Held to Maturity
securities
EQUITY SECURITIES
1. FVPL held for trading.
Accounting for ES as FVPL under IFRS 9 are the same under IAS
39 except that under IFRS 9, even those securities not held for
trading may be elected to be designated as FVPL.
4
2. Available for Sale securities (AFS) non-trading.

The same principle as the designation of ESFVOCI, however, the
amount taken to OCI for AFS is subsequently reversed in P/L.
such reversal is made when the securities are derecognized and
when I/L is recognized.
DEBT SECURITIES
1. DIFVPL those held primarily for profit taking opportunities arising
from fluctuation in interest rates and fair value.
2. AFS those that are neither held for trading nor do they qualify as HTM
securities.
3. HTM those that enterprise shows positive intention and ability to hold
until maturity.

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Financial Accounting 2

Investment in Securities IFRS 9 (Financial Instruments) & IAS 28

Figure 2: Designation as to whether the equity investment is at FV through P/L or

If the securities are non-trading, the enterprise shall make an

The carrying amount of the investment is adjusted to recognize

Purchase of bonds between interest payment dates

ACCOUNTING FOR INVESTMENTS UNDER IAS 39

2. Available for Sale securities (AFS) non-trading.

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