Accounting for investments under TFRS for NPAEs

TFRS for NPAEs (Chapter 9 “Investments”) states that there are two types of investments in debt and equity securities.

Keywords: Mazars, Thailand, Accounting, TFRS, NPAEs, Trading securities, Available-for-sale securities, SET, BEX, MAI

14 October 2015

(i) Investments in marketable securities

(ii) Investments in non-marketable securities

Investments in marketable securities

Investments in marketable securities are securities that are actively traded in the market during working hours and quoted market prices are disclosed publicly. The investments in marketable securities can be classified in two sub-categories as follows:

(a) Trading securities are both marketable debt and equity securities, and an entity holds and intends to sell those securities in the short term for a profit from changes in prices of the securities.

(b) Available-for-sale securities are investments in debt and equity securities which are not classified as a held-for-trading or held-to-maturity security.

Investments in non-marketable securities

These investments do not have any quoted market price or are actively traded in the market, such as general investments, investment in an associate, investment in a subsidiary and investment in a joint venture.

Measurement at initial recognition

An entity shall recognize the investment on acquisition measured at the initial purchase cost.

Subsequent measurement

Investments in equity Subsequent measurement
Held for trading Fair value* – change recognised in profit or loss
Available-for-sale Fair value* – change recognised in changes in shareholders’ equity
General investment Historical cost less any provision for decline in value
Investment in associate
Investment in subsidiary
Investment in joint venture

* NPAEs are permitted to subsequently measure investments in equity and debt securities at fair value (“mark to market”) if quoted prices in an active market are available. For example, securities held for trading that are listed on the Stock Exchange of Thailand (‘SET’), the Market for Alternative Investment (‘MAI’) and the Bond Electronic Exchange (‘BEX’).

This section takes a look at how Available-for-sale-securities transactions should be accounted for.

Example:

On 1 April 2013, the Company has purchased an equity security amounting Baht 1.5 million, which it classifies as available-for-sale.

At the end of the year 2013, the quoted market price of the securities increases by Baht 0.25 million therefore, the total investment value as at 31 December 2013 is Baht 1.75 million.

On 31 December 2014, the quoted market price of the securities drops and the total investment value decreases to Baht 1.65 million and the Company then sells the equity securities at the same date.

How should the Available-for-sale-securities be accounted for in financial statements?

(a) The Company records purchase of equity securities.

Date Description Debit Credit
April 1, 2013 Investments – available-for-sale 1,500,000  
     Cash at bank   1,500,000

(b) At the end of the year 2013, the Company records the increase in value of equity securities.

Date Description Debit Credit
December 31, 2013 Investments – available-for-sale 250,000  
 

                      Unrealised gain on available-for sale securities

(recorded  in change in shareholders’ equity)

  250,000

(c) At the end of the year 2014, the Company records decrease in value of the investments.

Date Description Debit Credit
December 31, 2014

Unrealised loss on available-for-sale securities

(recorded in change in shareholders’ equity)

100,000  
        Investments – available-for-sale   100,000

(d) The Company records sale of investments.

Date Description Debit Credit
December 31, 2014

Unrealised gain on available-for-sale securities

(Please see (c) above)

250,000  
      Cash at bank 1,650,000  
 

         Gain on available-for-sale securities

         (recorded in statement of income)

  150,000
 

          Unrealised loss on available for-sale securities

         (Please see (c) above)

  100,000
        Investments – available-for-sale   1,650,000

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