Question 21.2 Vuyokazi Limited is an investment house. The following is a list of some of...

  

Transcribed Image Text:

Question 21.2 Vuyokazi Limited is an investment house. The following is a list of some of their investments • Ordinary shares: The entity holds a portfolio of listed and unlisted ordinary shares. ✓ . . . Listed shares are actively traded by Vuyckazi's Treasury department to benefit from fair value gains (i.e. held for speculative purposes). The current portfolio was acquired at a fair value of C1 248 000 and transaction costs of C15 080 were incurred on acquisition. ✔Unlisted shares are held in private companies, which the board of directors have invested in to benefit from dividends and long-term capital appreciation on the shares. The current portfolio was acquired at a fair value of C1 560 000 and transaction costs of C19 500 were incurred on acquisition. ✓ In addition, there is also an investment in shares in a subsidiary company that cost C9 945 000 (fair value on acquisition) on which transaction costs of C1 065 600 were incurred on acquisition. Note: In terms of IAS 27 Separate financial statements, Vuyokazi has elected to account for its investment in subsidiaries in accordance with IFRS 9 in its separate financial statements. Preference shares ✓ The entity holds convertible preference shares acquired for a purchase price of C2 912 000 and on which transaction costs of C115 180 were incurred. Government bonds: ✓ The entity holds 10-year government bonds acquired at a fair value of C676 000 and on which transactions costs of C9 750 were incurred. ✓ These bonds are to be held to maturity Corporate bonds: ✓ The entity holds corporate bonds acquired for C4 064 000. Transaction costs of C118 960 were incurred on acquisition. ✓ These bonds are held to collect contractual cash flows, and to potentially sell if it makes economic sense. Required: Prepare a memorandum to Vuyokazi Limited's board of directors of outlining the classification and initial. measurement of the various investments in terms of IFRS 9 Financial instruments. Ignore expected credit losses. Question 21.2 Vuyokazi Limited is an investment house. The following is a list of some of their investments • Ordinary shares: The entity holds a portfolio of listed and unlisted ordinary shares. ✓ . . . Listed shares are actively traded by Vuyckazi's Treasury department to benefit from fair value gains (i.e. held for speculative purposes). The current portfolio was acquired at a fair value of C1 248 000 and transaction costs of C15 080 were incurred on acquisition. ✔Unlisted shares are held in private companies, which the board of directors have invested in to benefit from dividends and long-term capital appreciation on the shares. The current portfolio was acquired at a fair value of C1 560 000 and transaction costs of C19 500 were incurred on acquisition. ✓ In addition, there is also an investment in shares in a subsidiary company that cost C9 945 000 (fair value on acquisition) on which transaction costs of C1 065 600 were incurred on acquisition. Note: In terms of IAS 27 Separate financial statements, Vuyokazi has elected to account for its investment in subsidiaries in accordance with IFRS 9 in its separate financial statements. Preference shares ✓ The entity holds convertible preference shares acquired for a purchase price of C2 912 000 and on which transaction costs of C115 180 were incurred. Government bonds: ✓ The entity holds 10-year government bonds acquired at a fair value of C676 000 and on which transactions costs of C9 750 were incurred. ✓ These bonds are to be held to maturity Corporate bonds: ✓ The entity holds corporate bonds acquired for C4 064 000. Transaction costs of C118 960 were incurred on acquisition. ✓ These bonds are held to collect contractual cash flows, and to potentially sell if it makes economic sense. Required: Prepare a memorandum to Vuyokazi Limited's board of directors of outlining the classification and initial. measurement of the various investments in terms of IFRS 9 Financial instruments. Ignore expected credit losses.

Answer rating: 100% (QA)

Vuyokazi Limiteds Investments Ordinary shares Listed shares The shares are classified as held for tr... View the full answer