ACCA FR · Chapter 7 · Question 4 of 10
Under IFRS 9, how is an investment in equity shares of another company measured after initial recognition, if it is not held for trading?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) At fair value through profit or loss, unless an irrevocable election is made on initial recognition to use fair value through other comprehensive income
Explanation
Equity investments do not pass the solely payments of principal and interest test, so they cannot be held at amortised cost. The default is FVTPL. For equity investments not held for trading, an entity may irrevocably elect on initial recognition to use FVOCI. Gains and losses then stay in OCI and are never recycled, although dividends are still recognised in profit or loss.
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