The other comprehensive income election for equity instruments

Learning objectives

• Determine whether the irrevocable FVOCI election is available for an investment in equity instruments (not held for trading) and draw the consequence: changes in OCI, no recycling.L1, L2
• Record the journal entries for the FVOCI election for equity instruments and measure their effect on the financial position, profit or loss and other comprehensive income.L1, L2

Normative references

• IFRS 9 §5.7.5At initial recognition, the entity may make an irrevocable election to present in OCI subsequent changes in the fair value of an investment in an equity instrument within the scope of the Standard that is neither held for trading nor contingent consideration recognised by an acquirer in a business combination to which IFRS 3 applies. The election is made on an instrument-by-instrument basis, and amounts presented in OCI are not subsequently transferred to profit or loss (a transfer within equity is permitted), in accordance with para. B5.7.1.
• IFRS 9 §5.7.6When the election in para. 5.7.5 is made, dividends on the investment are recognised in profit or loss under the conditions of para. 5.7.1A (right established, inflow of economic benefits probable, reliable measurement); para. B5.7.1 excludes dividends that clearly represent a recovery of part of the cost of the investment.
• IFRS 9 §B5.7.1The election in para. 5.7.5, available only for investments in equity instruments that are not held for trading, is made on an instrument-by-instrument (share-by-share) basis; amounts presented in OCI are not subsequently transferred to profit or loss, although the cumulative amount may be transferred within equity; dividends are recognised in profit or loss in accordance with para. 5.7.6 unless they clearly represent a recovery of part of the cost of the investment.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

3 questions

• For an investment in shares for which the FVOCI election has been made, the amounts accumulated in OCI are not reclassified to profit or loss when the investment is disposed of.L1
• Alpha SA acquires 5% of the shares of a listed company, not held for trading, and elects to measure them at FVOCI. A year later, it sells these shares with accumulated gains of 12,000 in OCI. How should this accumulated amount be treated?L2
• Béta SA holds an investment in shares for which it has made the FVOCI election. At the reporting date, its fair value moves from {opening_carrying_amount} to {fair_value_closing}. Record the remeasurement entry.L2