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ACCA Strategic Professional · Strategic Business Reporting (International) · Financial instruments

Brill plc holds an equity investment in an unlisted company, not held for trading. On initial recognition Brill made an irrevocable election to present subsequent fair value changes in other comprehensive income. The investment is sold at a gain. Which statement is correct under IFRS 9?

Gains accumulated in OCI are never recycled to profit or loss for equity investments designated at FVOCI under IFRS 9. They may be transferred within equity on disposal. The election is irrevocable and dividends normally go to profit or loss.

  1. ACumulative gains in OCI are never reclassified to profit or loss, though they may be transferred within equityCorrect
  2. BCumulative gains in OCI are recycled to profit or loss on disposal
  3. CDividends received are always recognised in OCI
  4. DThe election can be reversed when the investment is sold

Explanation

For equity investments designated at FVOCI, gains and losses are not recycled to profit or loss on derecognition, although a transfer between components of equity is allowed. Dividends that are not a recovery of cost go to profit or loss. The election is irrevocable.

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