Chapter

15 – Financial Asset at Fair Value

Investment – assets held by an entity for the Financial asset held for trading – FVPL
accretion of wealth through distribution such as 1. To record acquisition
interest, royalties, dividends and rentals, for capital Trading securities xx
appreciation or for other benefit to be obtained. Commission expense xx
- classified either as current or noncurrent asset Cash xx

Financial asset – any asset that is cash, 2. To record increase in fair value
a contractual right to receive cash or another Trading securities xx
financial asset from another entity, Unrealized gain – TS xx
a contractual right to exchange financial
instrument with another entity under conditions 3. To record decrease in fair value
that are potentially favorable, and Unrealized loss- TS xx
an equity instrument of another entity. Trading Securities xx

Examples: 4. To record sale of investment
1. Cash or currency Cash xx
2. Deposit of cash Trading Securities xx
3. Financial assets representing a contractual Gain on sale of trading securities xx
right to receive cash in the future – trade
accounts receivable, notes receivable and loans Financial asset held for trading – FVOCI
receivable. 1. To record acquisition
Financial asset- FVOCI xx
Classifications: Commission expense xx
1. Financial asset FVPL – equity securities and Cash xx
debt securities
2. Financial asset FVOCI – equity securities and 2. To record increase in fair value
debt securities Financial asset- FVOCI xx
3. Financial asset at amortized cost – only debt Unrealized gain – OCI xx
securities
3. To record decrease in fair value
Equity security – any instrument representing Unrealized loss- OCI xx
ownership shares and rights, warrants or options Financial asset- FVOCI xx
to acquire or dispose of ownership shares at a
fixed or determinable price. 4. To record sale of investment
Cash xx
Debt security - any security that represents a Financial asset- FVOCI xx
creditor relationship with an entity Retained earnings xx

Ex. *Cumulative unrealized gain is transferred
a. Corporate bonds to retained earnings
b. BSP treasury bills Unrealized gain – OCI xx
c. Government Securities Retained Earnings xx
d. Commercial papers
e. Preference shares with mandatory redemption
date or redeemable at the option of the holder.

Initial measurement of financial Asset
-at fair value plus the transaction cost (if FVPL
transaction cost is expensed)

Subsequent measurement
a. FVPL
b. FVOCI
c. Amortized Cost