Investments at Fair Value through OCI
Long-term shares held for dividends, revalued at market price each year end, with gains going to equity, not profit. On the Balance Sheet.
In detail
Investments at Fair Value through OCI holds shares bought to keep for the long run and collect dividends, such as shares in a hydropower company or a bank. At each year end they are revalued to the NEPSE closing price, but the gain or loss does not touch profit: it goes to the Fair Value through OCI Reserve in equity, so the Profit and Loss is not swung by the stock market. Dividends received are income. On sale the accumulated reserve stays in equity rather than being recycled through profit. The choice to use this treatment is made per holding when it is bought and cannot be changed later, so decide with the auditor before posting.
Formula
Carrying value = Market price x Number of shares at the reporting date; Change for the year = Carrying value - Previous carrying value, posted to the OCI reserve.
Accounting entry
| Account | Debit | Credit |
|---|---|---|
| Investments at Fair Value through OCI | Rs 2,00,000 | |
| Bank Account (rename me) | Rs 2,00,000 |
How to record it in BRAccount
- 01Go to Invoicing > Journal Entry > New dated the purchase; debit this account, credit the bank for the cost.
- 02Submit. The entry above posts for 400 hydropower shares.
- 03At Ashadh end, look up the closing price and compute the new carrying value.
- 04Post a Journal Entry for the difference against Fair Value through OCI Reserve under equity.
- 05Record dividends with a Payment Entry or Journal Entry to a dividend income account, net of 5 percent TDS.
When to use it
Post by Journal Entry when shares are bought and when revalued. The revaluation gain goes to Fair Value through OCI Reserve.
Example from the demo books
Dr Investments at Fair Value through OCI Rs 2,00,000, Cr Bank Account Rs 2,00,000 for 400 shares of a hydropower company.