Equity Instruments IFRS 9 concept that STATES ‘Equity Investments’ to be Measured at fair value in the Balance Sheet, with value changes recognized in Profit or Loss, EXCEPT for those ‘Equity Investments’ for which the entity has elected to present value changes in OCI.
Equity Instruments IFRS 9 – Accounting
An ‘Equity Instrument‘ is DEFINED as any contract that evidences a RESIDUAL interest in the assets of an entity after deducting all of its liabilities.
IFRS 9 specifies CLASSIFICATION and MEASUREMENT of Financial Assets, Financial Liabilities, and Contracts to buy or sell non-financial items.
The accounting treatment for ‘Equity Instrument’ is:
- It is initially Measured at fair value LESS any transaction costs;
- Transaction costs of an equity transaction shall be accounted for as a deduction from the equity;
- Distributions to holders of equity instruments (i.e. Dividend) shall be recognized by the entity directly in equity;
- Changes in the fair value of equity instruments are NOT recognized in the ‘Financial Statements’; AND
- Redemption’s or Re-Financing are recognized as changes in the equity.
The Bottom Line
Equity Instruments IFRS 9 concept that STATES any Contract that evidences a RESIDUAL interest in the assets of an entity after deducting all of its liabilities. The ‘Objective‘ of IFRS 9 is to ESTABLISH principles for the financial reporting of Financial Assets and Liabilities that will present relevant and valuable information to users of Financial Statements.
Chartered Accountant (Institute of Chartered Accountants of Pakistan)
Bachelor of Accounting Honours (Asia e University, Malaysia)