Accountant's Insight - Company Holding Equity

[Diesal]

Hi all,

Just a quick question - lets say I am the owner of Berkshire Hathaway / Brait / Remgro (etc) and I own equity of companies - in my understanding this will be held as "trading stock" but then how does one account for the change in Market Value of the equity without actually selling it.

It's a bit of a conundrum and I think I must have missed that module in accounting

Anyone have any insight?

 

[NorthPole]

Depends on the company, if its held for sale or use... but the most basic idea would be that at a point in time they would perform a valuation on the stocks etc and then pass a revaluation journal (if kept as a asset not stock)... however if its stock you wouldn't increase it's cost as with IAS 2 it can only be kept at Cost or Net Realisable Value (NRV). I may be wrong though.

 

[Jehosefat]

I'm not an accountant but I would guess that it would be a valuation adjustment through the income statement (either in P/L or OCI depending on how the holding is classified).

 

[Diesal]

Thanks for the input guys, it won't be held, I've just got some clarity now

 

[HavocXphere]

Hi all,

Just a quick question - lets say I am the owner of Berkshire Hathaway / Brait / Remgro (etc) and I own equity of companies - in my understanding this will be held as "trading stock" but then how does one account for the change in Market Value of the equity without actually selling it.

It's a bit of a conundrum and I think I must have missed that module in accounting

Anyone have any insight?

It's classified as a financial asset at fair value through P/L.

Meaning you push whatever gain you need through the I/S to bring the balance on the B/S to the current market value.

You would only treat it as stock if it's very short term trading.

 

[pratlou]

Depends on your holding and how you classify those investments. If held through profit or loss, You pass on fair value adjustments to I/S.