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The difference between the newcarrying amount of the financial asset atamortized cost and the face value of the financialasset shall be amortized through profitor loss over the remaining life of thefinancial asset using the effectiveinterest method.Reclassification from Amortized Cost toThe fair value is determined at Fair Value -reclassification date. The difference between the previous carrying amountand fair value is recognized in profit orloss.Impairment - Financial assets at fair value –no more impairment loss is recognized in theprofit or loss.Financial assets at amortized cost –impairment loss is recognized. Tainting - No more tainting provision. The entityneed not hold all of those instruments until
maturity.Stock Rights - Measured at fair values.Investment in Associate - It is recognized initially at transactionprice, Excluding transaction costs. At each reporting date, an investor shallmeasure it at fair value, changes in fair valuesrecognized in profit or loss.MULTIPLE CHOICES:1.On January 1, 2010, Lim purchased trading equity securities for P5,000,000. Theentity also paid transaction costs amounting to P200,000. The securities had amarket value of P5,500,000 on December 31, 2010 and the transaction coststhat would be incurred on sale are estimated at P100,000. No securities weresold during 2010.What amount of unrealized gain or loss on these securities should bereported in the 2010 income statement?(a) P500,000 unrealized gain(c) P300,000 unrealized gain(b) P500,000 unrealized loss(d) P400,000 unrealized gainA2.Data regarding Bright Company’s financial assets at fair value through othercomprehensive income follow:CostMarketDecember 31, 20095,000,0004,600,000December 31, 20105,000,0005,800,000Differences between costs and market values are considered other thantemporary. The income statement for 2010 should report realized gain on thesesecurities at:(a) P1,200,000(b) P800,000(c) P400,000(d) 0D2009AFS securities5,000,000Cash5,000,000Unrealized loss (OCI)400,000Trading securities400,0002010Trading securities1,200,000Unrealized gain (OCI) 1,200,000(4,600,000 – 5,800,000)3.On January 1, 2010, Lemon Company purchased securities to be held as “at fairvalue through other comprehensive income”. On December 31, 2010, the costand market value were:Cost Market valueSecurity X2,000,0002,400,000Security Y3,000,0003,500,000Security Z5,000,0004,900,000On July 1, 2011, Lemon sold Security X for P2,500,000. What amount of gain onsale of financial asset should be reported in the 2011 income statement?(a) P500,000(b) P100,000(c) P400,000(d) P 0BCash 2,500,000Security X2,400,000Gain on sale 100,000Unrealized gain (OCI)400,000Retained earnings400,0004.The following information relates to Phil Company for 2010:Realized gain on sale of trading securities P40,000Unrealized gains arising during the period on trading securities120,000How much is the other comprehensive income of Phil to be included in theDecember 31, 2010 statement of financial position?(a) P 0(b) P40,000(c) P120,000(d) P160,000A5.The investment portfolio of Hip Inc. on December 31, 2010 contains the followingsecurities:
I.Art Co. ordinary, 3% ownership, 5,000 shares; cost, P100,000; market value,P95,000; classified as a financial asset at fair value through profit or loss.
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Gladys B Lapaz
Balance Sheet, Dividend, Generally Accepted Accounting Principles, a. Financial assets