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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