Investments Defined

- Investments are assets held by an entity for the accretion of wealth

through distribution such as interest, royalties, dividends and rentals,
for capital appreciation or for other benefits to the investing entity
such as those obtained through trading relationships

- Actually, they are not directly identified with the operating activities of
an entity and occupy only an auxiliary relationship to the central
revenue producing activities of the entity.

Various reasons why investments are held by entities:

1. For accretion of wealth through receipt of regular income (e.g.

interests, dividends, royalties and rentals)

2. For capital appreciation (real estate held for appreciation and direct
investment in gold, diamonds and other precious commodities)

3. Ownership control

4. Meeting business requirements (sinking fund, preference redemption

fund and plant expansion fund)

5. For protection (cash surrender value)

Kinds of Investments:

1. Investment in equity securities

Without significant influence (below 20% ownership):

a. Financial assets at fair value through profit or loss (Fair Value

Method)

b. Financial assets at fair value through other comprehensive

income (Fair Value Method)

c. Investment in unquoted equity instruments (Cost method)

With significant influence (20% to 50% ownership):

d. Investment in associate (Equity method)

With controlling interest (above 50% ownership):

e. Investment in subsidiary (Business Combination)

2. Investment in bonds

a. Financial assets at fair value

b. Financial assets at amortized cost

3. Other investments

a. Investment property

b. Investment in fund

c. Investment in joint venture

Financial asset held for trading

PAS 39, paragraph 9, as consequentially amended by PFRS 9, provides that

a financial asset is held for trading if:

a. It is acquired principally for the purpose of selling or repurchasing it in

the near term.

b. On initial recognition, it is part of a portfolio of identified financial

assets that are managed together and for which there is evidence of a
recent actual pattern of short-term profit taking.

c. It is a derivative, except for a derivative that is a financial guarantee

contract or a designated and an effective hedging instrument.

Financial asset held for trading