Page 535 - F2 Integrated Workbook STUDENT 2019

Answers to supplementary objective test questions

3.6 B, C

An acquisition of ordinary shares is an equity financial asset. Equity financial
assets that are not held for trade should be classified as fair value through other
comprehensive income (FVOCI). As a result, option A is true.

Initial recognition of a FVOCI financial asset is at fair value plus transaction
costs. The amount originally capitalised for the purchase of the shares will be
$1,040,000 ($1,000,000 + 40,000). Option C is false.

The subsequent treatment of the FVOCI financial asset under IFRS 9 will be to
revalue to fair value with any gains or losses taken to other comprehensive
income.

The gain for the year ended 31 December 20X4 is:

Fair value at 31 December 20X4 (15 × 100,000) 1,500,000
Carrying amount (1,040,000)
––––––––
Gain 460,000
––––––––
This gain is taken to other comprehensive income, not profit or loss. Option B
is false.

Dividends received are taken to other income on the statement of profit or loss.
Option D is true.

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