Subsequent Measurement of Fair value through profit and Loss assets

Subsequent Measurement of Fair value through profit and Loss assets

Fair value through profit and loss account assets are mainly held for trading purpose. The FVTPL assets are initially recognized at fair value and at each reporting period it is re measured at fair value.

Example of subsequent Measurement

ABC company purchase 5000 @ 10	$ 50,000
Transaction costs	$   2,000
The shares value fall 31.Dec,2014	$ 40,000
Share will be sold with four months

Solution

Important point for solving the example

1.      Initial measured at fair value ( i.e. cost in normal cases)

2.      Transaction cost is not included because it FVTPL asset

3.      Subsequent measured at fair value at each reporting date

4.      Increase and decrease in fair value will be charged to income statement.

Initial Measurement

Date	Particular	Dr.	Cr.
	Financial assets	$ 50,000
	Cash		$ 50,000

Subsequent Measurement

Date	Particular	Dr.	Cr.
	Profit & Loss	$ 10,000
	Financial asset		$ 10,000