Example of Fair value through Profit and Loss assets

Example of Fair value through Profit and Loss assets

In this type of financial asset the asset are primarily held for trading purposes i.e. it means that shares are to be sold in short term. These financial are kept primarily for the capital gain.

Example of Fair value Through Profit and Loss asset # 1

ABC & Co held shares of Oil & Co. The shares were acquired for $ 20 per share and it is expected that share will be sold in next month. ABC expects the market price will rise to $ 25 in next month.

Solution

The shares which are held for trading purpose is classified as financial asset (fair value through Profit and Loss account).

Example of Fair Value through Profit and Loss # 2

ABC & Co takes a loan stock of $ 2000, the loan stock is to be sold at open market in next week and ABC & Co is expecting a capital gain of $ 25.

Solution

The loan stock is bought for short term gain i.e. for trading purposes and expected to be sold in short term ,therefore the loan stock is financial asset of fair value through profit and loss.