Page 442 - SBR Integrated Workbook STUDENT S18-J19

Chapter 25

Example 10

FVOCI

The financial asset is initially recognised at its fair value of $5 million. The
asset will be measured at fair value through other comprehensive income
(FVOCI). Interest income is calculated using the effective rate of interest.
Revaluations to fair value are recorded in OCI:

Bfd Interest at 10% Cash receipt* Cfd Loss Fair value
$m $m $m $m $m $m

5.0 0.5 (0.2) 5.3 (0.8) 4.5

* = $5m × 4%

Interest income of $0.5 million is recorded in profit or loss. The asset is
revalued to its fair value with a loss of $0.8 million in OCI.

Because the asset is measured at FVOCI, the 12-month expected losses are
charged to profit or loss and removed from OCI. The entry for these is as
follows:

Dr Profit or loss $0.3m

Cr OCI $0.3m

In other words, $0.5 million of the downwards revaluation is recorded in OCI
and $0.3 million is recorded in profit or loss.

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