MGT401 Highlighted Handouts Lectures 7-16 Set 2 by Mr Shahbaz

Chapter – 7 · Short Term Investment · Sr. No

114-Short Term Investment - Equity and Debt Instrument 115-Measurement Of Investment - Equity Instrument 116-Measurement Of Investment - Equity Instrument Practice

Topic 114 – Short Term Investment in Equity or Debt Instruments

Investment in Instruments

a) Equity Instruments b) Debt Instruments

Investment in Equity Instruments (short-term)

Each financial asset is initially measure at its fair value.

In normal circumstances, transaction price is the fair value.

Transaction cost, if any, is recognised as expense in SOPL.

Topic 115 – Measurement of Investment in Equity Instruments

Investment in Equity Instruments

a) Initial measurement at fair value b) Subsequent measurement at fair value through profit or loss

Dividend Income

Dividend received during the reporting period is recognised as income for the year that appears in SOPL

Topic – 116 Measurement of Investment in Equity Instruments – Practice

Sample Co. made an investment of Rs. 400,000 in equity shares of Symbol Ltd. on 1st October 2020. Transaction cost incurred as broker’s fee Rs. 20,000. On the reporting date, 31st December 2020, the fair value of these shares was Rs. 350,000.

It’s a simple concept

Increase in fair value causes a gain (SOPL – Cr.) Decrease in fair value causes a loss (SOPL – Dr.)