Question

Activity 1: Investments measured at FVPL

You are the accountant of ABC Co. The balance of ABC's investment in PLDT shares ( measures at fair value through profit and loss) on December 31, 20x1 is 189,120 before year end adjustments. You havs obtained the documents below for the purpose of adjusting this account.

Document #1 : A Certification given to ABC Co. that shows that they have 100 shares as Capital stock.

Document #2: Is the photo

Requirements : Prepare the adjusting entry on December 31, 20x1.

544 Document #2: Chapter 9 P Pacifica PAL Holdings Panasonic Manufacturing Philippines Pepsi-Cola Products Philippines PetroEnergy Resources Petron Philex Mining Philex Petroleum Philippine Business Bank Philippine Estates Philippine Long Distance Telephone Philippine National Bank Philippine Realty&Holdings Volum 34,300,000 92,000 44,000 119,000 1,000 1.110,000 284,300 243,000 198,800 430,000 164,660 72,460 10,000 High 0.034 4.900 3.930 4.450 4.000 7.330 5.400 1.390 18.540 0.300 2,382.000 54.000 0.455 0-9 A BICIDIEIFIGHUJIKILIMNICIPIORISITUMWI WYIZ 52 Week 52 Week Low Clogo Match Low 0.033 0.034 0.001 3.03 0.067 0.028 4.800 4.900 0.400 8.89 6.210 3.000 3.860 3.930 0.030 0.77 4.780 3.500 4.400 4,400 5.000 3.870 4.000 4.000 0.100 2.56 6.594 3.030 7.240 7.250 -0.060 -0.82 12.120 6.750 5.280 5.370 0.090 1.70 9.720 4.840 1.350 1.380 0.020 1.47 8.750 1.150 18.400 18.420 -0.120 -0.65 20.000 14.000 0.295 0.295 -0.005 -1.67 0.435 0.230 2284.000 2,364.000 70.000 3.05 3,292.000 2124.000 53.400 54.000 9.100 -0.18 87.500 49.500 0.455 0.455 0.065 16.67 0.370 0.840

Answer 1

As per IFRS 9 - Financial Instruments,

Financial Assets under Fair Value through Profit and Loss Account (FVTPL) are initially recorded at Fair Value only. Subsequently, at the Balance Sheet date, such an asset is required to be measured at Fair Value (Market Value) and any changes in carrying amount due to to fair valuation will be recognized in Profit and Loss Account.

In the given case, balance of investment in PLDT shares prior to adjustments on 31st December 20X1 is $ 189,120.

The document provided shows that the closing rate for PLDT shares on 31st December 20X1 is $ 2,364 per share.

Therefore, the fair value of PLDT shares on 31st December 20X1 = 2364 x 100 shares = $ 236,400.

There is a increase in the fair value of shares as compared to the carrying amount in books of accounts. We have to measure the Investment at Fair Value and the change would be recognized in Profit and Loss Account.

The change is 236,400 - 189,120 = $ 47,280 which is charged to Profit and Loss Account.

Journal Entry -

Investment in PLDT Shares A/c 47,280

To Fair Value Gain A/c ( Profit and Loss) 47,280

(being adjustment entry for investment in PLDT shares at Fair Value)