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Financial assets and financial liabilities

Example 3

Equity investment

On 21 November 20X6 a company invested in 6,000 ordinary shares of a
listed company at a cost of $2.70 per share, plus transaction costs of $324.

At 31 December 20X6 the shares have a market value of $2.95 per share.

Required:

Show the impact of the above transaction on the statement of profit or
loss for the year ended 31 December 20X6.

Solution

The shares are measured at Fair Value through Profit or Loss (FVPL), and
revalued at the year-end with any gain or loss taken to the statement of profit
or loss. The acquisition costs are immediately written off as an expense in
the statement of profit or loss.
Statement of profit or loss $

Transaction costs (324)
Gain on FVPL investment 1,500

($2.95 – $2.70) × 6,000

119