Clarification on Financial instruments measured through FVTPL

Hi,

Request your guidance on accouting and presentation for financial instruments per IND AS / IFRS.

Company: offshore investment company
Nature of business: Investment in securities and the financial instruments are held for sale / available for sale (no hedging)

FYE: 31-Dec-2020
1-Feb-2020, security is purchased for 100 and the transaction cost of 2 which expensed directly in P&L.

31-Dec-2020, the FV is 150, so change in FV of 50 recongnised in P&L and the carrying amount of 150 (including unrealised gain) is presented in Balance Sheet.

In P&L presented as :
Change in FV of financial instruments through FVTPL
Unrealised gain: 50
Total: 50

FYE: 31-Dec-2021
1-Mar-2021, the above security sold for 90
Unrealised gain as of 31-Dec-2020 reversed / adjusted to unrealised loss as of 31-Dec-2021: 50 taken to P&L
and the realised loss on original cost of 10 also recognised in P&L

In P&L presented as :
Change in FV of financial instruments through FVTPL
Unrealised loss: 50
Realised loss: 10
Total: 60

Is the above accounting and presentation is correct?

OR

FYE: 31-Dec-2020
As the financial instruments are measured through FVTPL,

In P&L should be presented as:
Gain on change in FV of financial instruments through FVTPL: 50

FYE: 31-Dec-2021
In P&L should be presented as below for difference between the carrying amount as of Dec-20 and sale price:

Loss on change in FV of financial instruments through FVTPL: 60

And

As the company measuring the Financial Instruments through FVTPL, do we need to separately disclose the Unrealised and realised gain / loss?

Kindly advise

Hi Saranya,

Great question on accounting for financial instruments measured at Fair Value Through Profit or Loss (FVTPL)under IND AS / IFRS! Here’s a detailed clarification for your scenario:

1. Transaction Costs on Purchase:

Under IND AS 109 / IFRS 9, transaction costs for financial instruments classified as FVTPL should be expensed immediately in P&L.
So, expensing ₹2 as transaction cost directly in P&L on purchase is correct.

2. Fair Value Changes and Presentation in P&L:

For FVTPL instruments, all changes in fair value (both unrealised and realised) are recognised in P&L immediately.
The presentation can be aggregated as a single line item (e.g., "Change in fair value of financial instruments at FVTPL") without separating realised and unrealised components.

Your 1st Scenario:

FYE 31-Dec-2020:

Purchased at ₹100, transaction cost ₹2 expensed.
FV on 31-Dec-2020 is ₹150.
Unrealised gain ₹50 (150 - 100).

P&L:

Change in FV of financial instruments through FVTPL: ₹50 gain

This is correct.

Your 2nd Scenario:

FYE 31-Dec-2021:

Sold at ₹90.
Carrying amount at 31-Dec-2020 = ₹150.
Loss from 150 to 90 = ₹60.

Presentation options:

You do not have to separately show "unrealised loss reversal" and "realised loss". The entire difference between previous carrying amount and sale proceeds can be presented as a single loss on change in fair value of financial instruments at FVTPL.

So instead of:

Unrealised loss: 50
Realised loss: 10

You can show:

Loss on change in FV of financial instruments through FVTPL: ₹60

Summary:

Aspect	Practice under IND AS/IFRS
Transaction cost on purchase	Expense immediately in P&L
Unrealised gains/losses	Recognised in P&L immediately
Realised gains/losses	Recognised in P&L immediately
Presentation in P&L	Can present as a single aggregated line item; no need to separate realised & unrealised
Disclosures	Separate disclosure of realised/unrealised gains or losses is not mandatory for FVTPL instruments but may be included as per management discretion or specific disclosure requirements

Additional Note:

If your company wants to provide detailed information, it can disclose realised and unrealised gains/losses separately in notes, but this is not required under IND AS 109/IFRS 9.

Conclusion:
Your second approach (aggregating the gains/losses) is more aligned with standard practice and simpler. So, for FY21, showing ₹60 loss as "Loss on change in FV of financial instruments at FVTPL" is correct.