IFRS: Equity Portfolio

Equity Portfolio

Classification	Held-for-trading	Available-for-sale	Held-to-maturity	Associated Company (Equity method, no control)
Net Income	Dividend Unrealized P&L	Dividend	N/A	Share of Net Income
Designated at fair value? Unrecognized gain/loss would then be included in income?	No	Yes	No	No (*)

(*) If an equity-holding company is a manufacturing company and not a venture capital or mutual fund company, it may not account for its significant influence in the Associated Company using fair value.

A Company's Equity Portfolio (at yer end)

Stock	A	B	C	D
Classification	Held-for-trading	Available-for-sale	Available-for-sale	Associated Company
Cost	$100,000	$150,000	$250,000	$500,000
Market value, end-of-year	$97,000	$151,000	$257,000	$506,000
Dividends received during the year	$1,000	$2,000	$3,000	$4,000
The company's share of investee's net income for the year	$5,000	$7,000	$10,000	$15,000
Total Assets				$2,000,000
The company's ownership				40% (equity method)
The company has representation on the security's Board of Directors?				Yes
The company has effective control?				No
Proportionate consolidation instead of equity method				Net Income: Unchanged Total Assets: Increased ROA: Decreased (*)

The contribution of the equity portfolio to the company:
Net Income = ($97,000-$100,000) + $1,000 + $2,000 + $3,000 + $15,000 = $18,000


Net Income (If at acquisition, all of the equity securities that were eligible to be designed as investment at fair value were so designated, the amount that the entire equity portfolio would contribute to an equity portfolio-holding company's net income)
= ($97,000-$100,000) + $1,000 + ($151,000-$150,000) + $2,000 + ($257,000-$250,000) + $3,000 + $15,000
= $18,000 + $1,000 + $7,000
= $26,000


(*) Under the equity method, the cost, $500,000 will be included in total assets;
Under the proportionate consolidation method, the ownership(%) times Total Assets, 40% * $2,000,000 = $800,000 will be included in total assets.