recognised within OCI is reclassified from equity to profit or lossFor equity instruments measured at fair value throughOCI:•changes in fair value will be included within OCI•dividends received from the equity instruments will be included withinprofit or loss, and•changes in fair value of equity instruments that are included within OCIshallnotbe reclassified to profit or loss on the occurrence of an eventsuch as the sale of the investments
Example: Accounting for a financial asset at fair value through other comprehensive income On 1 July 2018, Bear Ltd acquired 100 000 shares in Island Ltd at a price of $10 each. There were brokerage fees of $1500. The closing market price of Island Ltd shares on 30 June 2019 — which is the entity’s financial year end — was $12. REQUIRED Provide the required accounting journal entries for Bear Ltd to account for the investment in Island Ltd using fair value through other comprehensive income. 1 July 2018 Dr Cr Investment in Island Ltd 1 001 500 Cash 1 001 500 For financial assets measured at FVOCI, transaction costs associated with the acquisition of the asset shall be included as part of the cost of the asset. 30 June 2019 Dr Cr Investment in Island Ltd 198 500 Gain in fair value (included within OCI) 198 500 There would be a reserve that is part of equity, which would accumulate the gains that are included within OCI. For equity instruments, this reserve cannot subsequently be transferred to profit or loss.
•Initially measured at fair value•Subsequently measured at:oamortised cost using the effective interest method with changes recognised in profit or loss;orofair value through profit or loss, in whichcase:▪amount of the change in fair value relates to changes in own credit risk to be recognised in OCI;and▪remaining amount of the change (e.g., change inthe general level of interest rate) in profit orloss.Fair value through OCI–is not allowed (except for some hedges –covered next week)•Majorimprovement over previous standard AASB139(now replacedby AASB 9) under which deterioration in own credit risk resulted in a gain in P&L.Recognition and measurement of financial liabilities