CFA CFA Level 2 Question of the Week: Level 2 – Financial Reporting and Analysis

Question of the Week: Level 2 – Financial Reporting and Analysis

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      Select the most appropriate classification/treatment of the following investment in a financial asset under IFRS 9:

      A 10% passive equity stake in a key supplier held for the purpose of capital gains.

      • A. Amortized cost.
      • B. Fair value through profit and loss.
      • C. Fair value through other comprehensive income.
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      The correct answer is Option B. 

      This is an equity investment, which eliminates amortized cost.  Since the purpose of the investment is to generate capital gains, the intent is to hold the securities for future trading/sale.  As such, the financial asset can only be categorized as fair value through profit and loss.

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