INVESTMENTS

INVESTMENT PURPOSE
(1) Investment in EQUITY Instrument To earn from changes in fair value and
FINANCIAL ASSET AT FAIR VALUE dividends
(2) Investment in EQUITY Instrument To benefit from exercising significant
ASSOCIATE influence over another entity.
(3) Investment in DEBT Instrument To earn from changes in fair value and
interest.

(1) Investment in EQUITY Instrument - FINANCIAL ASSET AT FAIR VALUE (PFRS 9)

Classified either:
CATEGORY TYPE OF INSTRUMENT RECLASSIFICATION
EI at FVTPL Equity NOT ALLOWED
EI at FVTOCI Equity NOT ALLOWED

Measurement summary for equity investments at FAIR VALUE:

END OF
CHANGES
TRANSACTION REPORTING
CATEGORY INITIAL IN FAIR DISPOSAL
COSTS PERIOD
VALUE
(Subsequent)
SP – FV
EI at FVTPL Fair Value Expense Fair Value P/L Gain or Loss on Sale
P/L

NO
Gain or Loss on Sale
Fair Value + OCI recognized in P/L
EI at FVTOCI TRANSACTION Capitalized Fair Value *Cumulati Note: Adjust muna
COST ve bago benta – PASOK
SA OCI ang FV
changes

Summary of Treatment for Dividends:

DIVIDEND TYPE TREATMENT AMOUNT
Dividend income in P/L
Face Amount - Received
Cash Dividends Cash xx
or Receivable
Dividend Income xx
Dividend income in P/L
Fair Value of Property -
Property Dividends Property Asset xx
Received or Receivable
Dividend Income xx
Not recognized as INCOME.
Share Dividends Recorded by MEMO ENTRY NONE
ONLY.

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(2) Investment in EQUITY Instrument – ASSOCIATE (EQUITY METHOD – PAS 28)
The summary of the influence and classification are summarized below:
LEVEL OF % OF METHOD CLASSIFICATION APPLICABLE
INFLUENCE OWNERSHIP PFRS (IFRS)
Little / NONE < 20% Fair Value FA @ Fair Value PFRS 9
Investment in
Significant 20% to 50% Equity PAS 28
Associate
Investment in
Control > 50% Consolidation PFRS 10
Subsidiary
No Qualitative Investment in
Joint Control Equity PAS 28
Presumption Joint Venture

The computation of the carrying amount of investment using EQUITY METHOD is:
Cost of Beginning Balance Pxx
Share of Profit of Associate (SOPA) xx
Share of Loss of Associate (SOLA) (xx)
Share in OCI – Gain (SOCI – Gain) xx
Share in OCI – Loss (SOCI – Loss) (xx)
Distribution (Dividends) (xx)
Additional Investment (Acquisition) xx
Disposal of Investment (CV) (xx)
Impairment Loss, if any (xx)
Carrying Value Pxx

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(3) Investment in DEBT Instrument
BUSINESS MODEL TEST
 Determined at a level that reflects how GROUPS OF FINANCIAL ASSETS are
managed TOGETHER to achieve a particular business objective.
 It is NOT an instrument-by-instrument analysis. It can be performed at a HIGHER
LEVEL OF AGGREGATION.
FOUR STEPS:
STEP 1: Instrument Level Subdividing as necessary the assets into separate groups
“Characteristics Test” or portfolios according to the way they are managed.
Identifying the objectives, the entity is using in the course
STEP 2: Aggregate Level
of its business to manage each grouping or portfolio.
Based on the OBJECTIVES – classify each group or portfolio
STEP 3: HTC/HTC&S/OTHER as being “HELD TO COLLECT”, “HELD TO COLLECT &
SELL”, or “OTHER”
HELD TO COLLECT – evaluate its appropriateness of the
STEP 4: Back-Testing
classification by back-testing against past activities.

Holding to Collect Holding to Collect

OBJECTIVE /
Contractual Cash Contractual Cash OTHERS
REASON
Flows Flows & TO SELL (Could be FVTPL)
FOR SALE
(AMORTIZED COST) (FVTOCI)
Overarching INTEGRAL - Collecting Both: INCIDENTAL - Collecting
– Objective cash flows INTEGRAL - cash flows
INCIDENTAL – Sales Collecting cash flows INTEGRAL – Sales, for
INTEGRAL – Sales trading (to sell) or Cash
flows are not
representing SPPI.
Examples of As part of:
why SALES 1. Managing Liquidity
In response to
happen in needs With a program of
increase in asset’s
each 2. Maintaining a ACTIVE BUYING &
credit risk or to
category particular interest SELLING to realize Fair
manage credit
yield profile or Value
concentration risk
3. Matching duration
of financial assets

Summary of Classification for DEBT INVESTMENTS:

CATEGORY TYPE OF INVESTMENT RECLASSIFICATION
DI at FVTPL Debt ALLOWED
DI at FVTOCI Debt ALLOWED
DI at Amortized Cost Debt ALLOWED

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Measurement summary for Debt Investment:
CATEGORY Initial End of Reporting Period Changes in FV
DI at FVTPL Fair Value Fair Value Profit or Loss
Fair Value +
DI at FVTOCI Fair Value OCI
Transaction Cost
Fair Value + NOT
DI at Amortized Cost Amortized Cost
Transaction Cost RECOGNIZED

TRANSACTION COSTS:
Transaction Cost DO NOT INCLUDE: (Initial Recog) = FV + TC
1. Financing Costs Transaction costs will change the EFFECTIVE
2. Internal Administrative or INTEREST OF THE DEBT SECURITIES.
Holding Cost E ective Interest will be reduced by the e ect of
3. Debt Premiums or Discounts Transaction Cost. Hence, Amortization of DI is
adjusted.

INTEREST INCOME – recognized in PROFIT OR LOSS

DI at FVTPL Nominal Interest
DI at FVTOCI E ective Interest
DI at Amortized Cost E ective Interest

Reclassification of Debt Investments:

FROM TO REQUIREMENT
DI at Amortized DI at FVTPL At reclassification date – measure at FAIR VALUE
Cost FV vs AC – di erence is recorded in PROFIT OR
LOSS
DI at Amortized DI at FVTOCI At reclassification date – measure at FAIR VALUE
Cost FV vs AC – di erence is recorded in OCI
DI at FVTPL DI at Amortized At reclassification date – measure at FAIR VALUE
Cost and this will be the NEW GROSS CARRYING
AMOUNT
You need to compute for EFFECTIVE INTEREST for
amortization.
DI at FVTPL DI at FVTOCI Asset continues to be measured at FAIR VALUE, but
subsequent gains (losses) are recognized in OCI
rather than P/L
DI at FVTOCI DI at Amortized Cumulative Gain (Loss) previously recognized in
Cost OCI is removed from equity and applied against
the FAIR VALUE of the financial asset at
reclassification date.
DI at FVTOCI DI at FVTPL Asset continues to be recognized in FAIR VALUE and
the cumulative gain (loss) previously recognized
in OCI is reclassified from equity to loss.

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