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L t Lecture 3

Stock right g / Warranty/ y | Investment property |

STOCK RIGHT What is a stock rights g ? | A stock rights are rights to buy new shares for cash to existing shareholders by specific price i on ffuture t d day. | Why issue shares to existing shareholders? | Legally a rights issue must be made before a new issue to the public. This is because existing shareholders have the “right of first refusal� on the h new shares. h |

One or more rightsg stock warranty y Realizable Cost of rights < Stock market value Otherwise,The price at which the new shares are issued is generally much less than the prevailing market price for the shares. |

3 special p days y to issue stock rights: g 他 Declared day 他 Issued day 他 Maturity date

Declared date

Issued date

Stocks and Ri h Rights

Issued date

Maturity y date

Stocks and Ri h Rights

FOR EXAMPLE p y “A” p purchased 1000 units of common stocks “B’ Company company by $2 per share. After 3 month “A” company received 200 stock rights to b 1 share buy h b by $2 $2.5 5 iin ffuture. t O On rights i ht iissue d day : - Market value of stock – $2.2 - Market value of rightsrights $1.0 $1 0

Market value


Total Cost

Unit cost






Stock rights


8 33 8.33

166 6 166.6

0 833 0.833

Total amount




Dt Stock investment 2000 Ct Cash 2000 Dt Stock rights investment 166.6 Ct Stock investment 166.6

After 2 months they y realized 50 rights g . They y purchased 50 stocks by $2.5. Dt Stock investment 125 Ct Stock rights investment 41.65 Ct Cash 83.35

They y sold 30 stock rights g by y$ $1.2. Dt Cash 36 Ct Stock rights investment 24.99 Ct Gain of stock rights investment sold 11.01


They y are land and buildings g held as investments,, and not for the consumption in the operation of business

MEASUREMENT AT RECOGNITION An investment property shall be measured initially at its cost. Transaction costs shall be included in the initial measurement. measurement

For Purchased Property:

Cost includes purchase price i and d di directly tl attributable costs

For Self-Constructed Property:

Cost is the cost at the date when the development or construction is complete

For Finance Leased Asset:

Cost is the lower of the fair value of the property and th presentt value the l off the th minimum lease payments

â&#x20AC;˘ An item of property property, plant and equipment should be recognized as an asset and recorded at its cost â&#x20AC;˘ Cost= Purchase Price + Other acquisition costs


land held for long-term long term capital appreciation


land held for a currently undetermined f t future use


a building g owned by y the entity y and leased out under one or more operating leases.


a bu building d g that t at is s vacant aca t but is s held e d to be leased out under one or more operating leases.


It the subsequent q expenditure p only y restores or maintains the future economic benefits to the originally assessed standard, it should be written off as an expense when it is incurred. incurred Examples include repairing and maintenance




COST MODEL An entity using shall measure ALL of its investment property p p y in accordance with |

IAS 16 Property, Plant & Equipment requirements for that model, or


IFRS 5 Non-current Assets Held for Sale and Discontinued Operations for investment properties that meet the criteria to be classified as held for sale


Investment property under operating lease shall be carried i d att the th fair f i value l

FAIR VALUE MODEL An entity that chooses the fair value model shall measure ALL of its investment property at fair value EXCEPT where the fair value of the investment property is not reliably determinable on a continuing basis. Investment property under operating lease shall be recognised at the fair value |

A gain or loss arising from a change in the fair value of investment property shall be recognised in profit or loss for the period in which it arises |

the fair value of investment property shall reflect market conditions at the balance sheet date. date |


L t 3Lecture3 II NVESTMENT Stock right / Warranty/g y Investment property S TOCKRIGHT What is a stock rights ?g A stock rights are right...