actually equity accounting for an associate and fair valuing an afs investment quite similar.
fair value gain or loss for AFS investment in BON goes through OCI previously and hit reserve while now goes direct to profit and loss and hit profit and retained earnings
both have same impact on total comprehensive income actually, just that one comes before profit line while the other after profit line.
^^ why is there a gain when they bought more and convert into associate? I thought usually the principle is the lower of cost or market? Once it is associate it is no longer MTM right?
Trying to understand the accounting intricacies here because I don't remember any company booking gains when buying under GAAP... only when selling... or is this an IFRS thing?
initially they booked as investment in equity securities. so it goes like this:
Dr Investment in equity securities
Cr Cash
Every period when they MTM,
Dr Investment in equity securities
Cr AFS reserve
Now that they increased to 20% and is accounted for as an associate,
Dr AFS reserve
Dr Investment in assoc
Cr Investment in equity securities
Cr Cash
To reverse out from OCI and rebook as associate. You can see it from the non-cash adjustment in CF statement and also CFI, and the reversal from OCI plus an increase in associate from the b/s.
Cheers
^^^ Thanks but where is the PnL entries/ impact to book as a PnL gain?
initially they booked as investment in equity securities. so it goes like this:
Dr Investment in equity securities 100
Cr Cash 100
Every period when they MTM,
Dr Investment in equity securities 100
Cr AFS reserve 100
Now that they increased to 20% and is accounted for as an associate,
Dr Investment in associate 250
Cr Investment in equity securities 200
Cr Cash 50
Dr AFS reserve 100
Cr P&L gain 100 (the one off gain)
i think its like this?
^^ Thanks and understood... so the key thing in these entires is whether Dr Investment in associate should be booked at lower of cost or market, which I thought is a long standing conservative accounting principle, ie 150 rather than 250, since it is not a disposal realising gains? Is this a new IFRS thing?
http://www.businesstimes.com.sg/companie...in-h2-2015
BANK RESULTS
OCBC expects impact from tepid housing market in H2 2015
Q3 net profit - including one-off gain and Wing Hang contribution - up 62% at S$1.23b
By
Jamie Lee leejamie@sph.com.sg@JamieLeeBT
31 Oct5:50 AM
Singapore
OVERSEA-CHINESE Banking Corporation (OCBC) expects the impact of fewer new housing loans in Singapore to be reflected in the second half of next year, its chief executive Samuel Tsien said on Thursday.
But the Wing Hang Bank acquisition could offer some buffer in this
@specuvestor
technically on the b/s side, it is still the same, just switching from AFS investment to associate. It is sort of ambiguous on the treatment part since ~14% stake as AFS investment is carried at MTM then when you rebook it (+6% to 20% stake) as an associate, the 6% will be at the acquired cost (which is also the MTM value). Also it's just recycling of PnL as the equity base is unchanged.
^^^ The treatment actually determines if the MTM unrealised gains ie AFS reserve will be reversed out as a balance sheet entry:
Dr Investment in associate 150
Cr Investment in Equity Securities 200
Cr Cash 50
Dr AFS Reserve 100
or hitting the PnL:
Dr Investment in associate 250
Cr Investment in Equity Securities 200
Cr Cash 50
Dr AFS Reserve 100
Cr PnL 100
Nothing wrong with both MATHEMATICALLY but the principle will determine which is acceptable, that's why I thought it may be a new IFRS thingy
(31-10-2014, 05:54 PM)specuvestor Wrote: [ -> ]Nothing wrong with both MATHEMATICALLY but the principle will determine which is acceptable, that's why I thought it may be a new IFRS thingy
I checked the road-map, and didn't find anything relevant. I am not an accountant, thus might miss it.
http://www.pwc.com/sg/en/illustrative-an...lguide.pdf