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
Menu
Clarification on Financial instruments measured through FVTPL
Replies (1)
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.
Recent Topics :
- Representative assessee
- Investment Income as Business Income for Sec. 44AD
- In ITR 4 u/s 44ADA what amount we shoud show under
- Salary expenses how to treat
- Pos related issue
- Gift of unlisted shares to friend upon marriage
- Utilising Section 54(F) for capital gains reinvest
- GST ewaybill closure and Bill to ship to GST numbe
- TDS ON PARNTER INTEREST
- Share important chapters of ca inter costing
Related Topics :
CAclubindia
