Salmon Corporation purchased an investment in 2017 (an equity investment without significant influence).The purchase price of $94,000 included transaction costs of $1,000.Assuming the transaction costs were capitalized and Salmon follows IFRS, which accounting method did Salmon use to account for this investment?

Question

Quizplus · Accepted Answer

According to IFRS, if the investment is an equity investment without significant influence and Salmon has chosen to carry it at fair value, then the fair value option can be chosen either through net income or OCI. Since Salmon has chosen to capitalize the transaction costs, which suggests the intention for long-term holding, it is more appropriate to use fair value through other comprehensive income (FV-OCI) method. This method recognizes the unrealized gains or losses in other comprehensive income until the investment is sold, when the cumulative gain or loss can be reclassified to net income.

Salmon Corporation Purchased an Investment in 2017 (An Equity Investment