Available-for-sale financial assets
Available-for-sale financial assets refer to financial assets that a company owns and can be sold at any time. These financial assets can be stocks, bonds, funds, etc., and the company can decide when to sell these assets based on market conditions. The value of available-for-sale financial assets will change with changes in market conditions.
Definition: Available-for-sale financial assets refer to financial assets that a company holds and can sell at any time. These financial assets can include stocks, bonds, and funds, and the company can decide when to sell these assets based on market conditions. The value of available-for-sale financial assets fluctuates with market conditions.
Origin: The concept of available-for-sale financial assets originates from International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS), particularly IAS 39 'Financial Instruments: Recognition and Measurement'. This concept was introduced to better reflect the purpose and management strategy of holding financial assets.
Categories and Characteristics: Available-for-sale financial assets can be categorized into the following types:
- Stocks: Shares of other companies held by the company, which can be traded on the open market.
- Bonds: Government or corporate bonds held by the company, which can be sold in the secondary market.
- Funds: Various investment fund shares held by the company, which can be bought and sold based on market conditions.
Specific Cases:
- Case 1: A company holds a batch of listed company stocks, initially purchased at a cost of 1 million yuan. As market conditions change, the market value of these stocks rises to 1.5 million yuan. The company decides to sell these stocks when the market value is high, realizing an investment gain of 500,000 yuan.
- Case 2: A company holds a batch of government bonds, initially purchased at a cost of 2 million yuan. Due to a decrease in market interest rates, the market value of these bonds rises to 2.2 million yuan. The company sells these bonds when the market value is high, realizing an investment gain of 200,000 yuan.
Common Questions:
- Question 1: How is the fair value of available-for-sale financial assets determined?
Answer: Fair value is usually determined through market quotations or valuation techniques, depending on the type of asset and the activity level of the market. - Question 2: How do changes in the fair value of available-for-sale financial assets affect financial statements?
Answer: Changes in fair value are typically included in other comprehensive income and do not directly affect current period profits, but they are transferred to the income statement when the asset is sold.
