Financial Assets at Fair Value

Financial Assets
at Fair Value
(Investments)
By: Daluro, Arjay E.

Estrel, Yna Christiana S.
Investments
An investment is an asset held by a) For accretion of Wealth
an enterprise for the accretion of b) For capital appreciation
wealth through distribution (such c) For ownership control
as interest, royalties, dividends d) For meeting business
and rentals), for capital requirements 2
appreciation or for other benefits e) For protection

to the investing enterprise such as
those obtained through trading
relationships.
- IASB
(International Accounting
Standards Board)
Investments
1. Trading Securities or Financial Assets @FV through PnL
2. Financial Assets @ FV through OCI
3. Investment in Equity Securities
4. Investment in Bonds or Financial Assets @ Amortized Cost 3
5. Investment in Associates
6. Investment in Subsidiaries
7. Investment in Property
8. Investment in Fund
9. Investment in Joint Venture
Investments
▹ Current Investments
▹ Non-Current Investments
4
Investments
▹ Current Investments
▹ Readily realizable
▹ Intended to be held for not more that 5
12 months
▹ Non-Current Investments
▹ Investments other than Current
Investments
▹ Intended to be held for more than
one year
Financial Instrument
▹ Any contract that gives rise to

both financial assets of one entity, 6
or a financial liability or equity
instrument of another equity.
▹ - PAS 32, par. 11
Financial Asset
▹ A financial asset is any asset that

is: 7
￭ Cash
￭ A contractual right to receive
cash or another financial asset
of another entity
Financial Asset
￭ contractual right to exchange

financial instrument with
another entity under
8
conditions that are potentially

favorable
￭ An equity instrument of
another entity
Financial Liability
▹ Any liability that is a contractual

obligation to; 9
￭ Deliver cash or Financial Asset
￭ Exchange financial instrument
(potentially unfavorable)
Equity Securities
▹ Encompasses any instruments

representing ownership shares 10
and right warrants or option to
acquire or dispose ownership
shares at a fixed or determinable
price.
Debt Securities
▹ Any securities that represents a

creditor relationship with and an 11
entity
￭ Has a Maturity date and a
Maturity Value
“
Summary Measuring
Financial Assets
(Investments)
12
Measurement of equity
investments
1. Held for trading

at fair value through profit or loss
2. Not held for trading 13
as a rule, at fair value through profit or

loss
3. Not held for trading
at fair value through other
comprehensive income by irrevocable
election
Measurement of equity
investments
4. All other investments in quoted equity

instruments
at fair value through profit or loss 14
5. Investments in unquoted equity

instruments
at cost
Measurement of debt
investments
1. Held for trading

at fair value through or loss
2. Held for collection of contractual cash 15
flows
at amortized cost
3. Held for collection of contractual cash
flows
at fair value through profit or loss by
irrevocable designation or fair value
option
Measurement of debt
investments

flows and for sale of the financial asset
at fair value through other 16
comprehensive income
Measurement of debt
investments

flows and for sale of the Financial asset
at fair value through profit or loss by 17
irrevocable designation or fair value

option
Audit of
Investments
18
Audit Objectives &

Audit Procedures
Audit Objectives
To determine that:
 Investments exist (held by the entity or the entity
fund manager) and are owned by the entity. 19
 All recorded income from investments has

accrued to the entity at the end of the reporting
period.
 All investments owned by the entity at the end of
the reporting period are included in the statement
of financial position.
Audit Objectives
To determine that:
 All income accruing from investments at the end
of the reporting period has been recorded. 20
 Investments are included in the statement of

financial position at appropriate amounts. The
related investment income is included in the
Income statement at the appropriate amount.
 Investments are free of liens, pledges, or other
security interests, or if not, are adequate
disclosed.
Audit Objectives
To determine that:
 Investments and related investment income
accounts are properly classified, described, and 21
disclosed in the financial statements in

conformity with PFRS.
Audit Procedures
1. Prepare or obtain an analysis of the investment

account and:
￭ Trace to applicable general ledger balances. 22
￭ Vouch changes during the year by reference

to board minutes and brokers’ advices.
￭ Verify completeness of dividend and interest
revenues, and where necessary, by reference
to outside published sources.
￭ Check footings and cross-footings.
Audit Procedures
2. Conduct securities count and:

￭ Inspect securities as to registered owner.
￭ Reconcile and compare details with 23
investment analysis.
3. For securities held by an outside custodian:
￭ Arrange for a visit to the custodian and
conduct a count; or
￭ Confirm from the custodian the details of
securities held for the account of the entity.
Audit Procedures
4. Review minutes, agreements, and confirmation

replies for evidence of liens, pledges, or other
security interests in the entity’s investments and 24
of commitments to acquire or dispose of

investments.
5. Inspect market quotations, financial statements
of investee(s), and other evidence to determine
the current value of investments.
6. Discuss with the entity the process used by
management in classifying its investments.
Audit Procedures
7. Determine whether the client’s investment

activities are consistent with its business model
for managing financial assets. 25
8. Determine whether the decline in fair value of

held-for-collection financial assets below
amortized cost is other than temporary and is
properly recognized.
9. Verify computations of gains and losses from
disposals of investments.
Audit Procedures
7. Verify calculations of amortization of premium or

discount on held-for-collection financial assets.
10. Determine propriety of financial statement 26
presentation and adequacy of disclosures.

27
End.

Financial Assets at Fair Value

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Financial Assets at Fair Value

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Financial Assets

By: Daluro, Arjay E.

appreciation or for other benefits e) For protection

▹ Any contract that gives rise to

▹ A financial asset is any asset that

￭ contractual right to exchange

conditions that are potentially

▹ Any liability that is a contractual

▹ Encompasses any instruments

▹ Any securities that represents a

1. Held for trading

as a rule, at fair value through profit or

4. All other investments in quoted equity

5. Investments in unquoted equity

1. Held for trading

4. Held for collection of contractual cash

5. Held for collection of contractual cash

irrevocable designation or fair value

Audit Objectives &

 All recorded income from investments has

 Investments are included in the statement of

disclosed in the financial statements in

1. Prepare or obtain an analysis of the investment

￭ Vouch changes during the year by reference

2. Conduct securities count and:

4. Review minutes, agreements, and confirmation

of commitments to acquire or dispose of

7. Determine whether the client’s investment

8. Determine whether the decline in fair value of

7. Verify calculations of amortization of premium or

presentation and adequacy of disclosures.

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