Showing Investments at Market Value from Cost

Higgy

Hi Guys

I could really do with a bit of help on this one!

I've just had my Year-end Finance Meeting (year-end 31.12.10) where the Executive Committee have decided that rather than show our Investments on the balance sheet at Cost (as they are now) they want to show them at Market Value. I've just read up on FRS 25 (was a bit rusty!) but i'm still not quite sure how i'm suppost to record this?

We currently have the investments on the balance sheet at cost, when we dispose of a share holding the proft/loss on disposal goes through the P&L.

Do I need to adjust the opening figure as at 1st January 2010?

The difference between cost and market value is approx £50k does this go through the P&L as an unrealised gain on the current investments and if so where do i show this on the balance sheet when shares are individual, does it go against the portfolio as a whole?

I've always dealt with investments at cost so i'm completely in the dark about how to go about this?

Any offers!

PGM

Higgy wrote: »

The difference between cost and market value is approx £50k does this go through the P&L as an unrealised gain on the current investments and if so where do i show this on the balance sheet when shares are individual, does it go against the portfolio as a whole?

I believe this is what you'd do. Record it as other income - unreaslised income, and increase the value of the investment on the balance sheet by 50k also.

Steve Collings

FRS 25 deals with the presentation of financial assets/liabilities. You would normally look to FRS 25 for the classification as debt or equity. I think you would be better looking to FRS 26: Recognition and Measurement - in particular looking as to whether the investments qualify to be carried at fair value as some financial assets (investments) must be carried at amortised cost e.g. investments in equity instruments which do not have a quoted market price and whose fair value cannot be reliably measured (see paragraph 46 at FRS 26). Also be careful that the investments are not 'held-to-maturity' (see para 9 of FRS 26 for the definitions) as these cannot be measured at fair value.


Kind regards
Steve

Higgy

Thanks for your input guys, i've revalued the opening balance of 2009 accounts and gone on to restate 2009 accounts to reflect the change in market value and for comparision purposes for 2010 accounts. The transactions prior to 2010 have been posted via reserves with the change in market value being allocated as an unrealised profit on the P&L and all investments have been amended on the BS to reflect market value as at year-end.
Sounds easy now!!
All our investments are held in a portfoilio and current market values are issued monthly, oh i've also amended the Statement of Accounting Policies!
All in a days work!