Investment Options made Easy!

TechnicalExams
Written By Arish Faisal

“Accounting isn’t just about numbers — it’s about understanding relationships. The more power we have over decisions, the deeper our reporting responsibility.”

It’s a bright Monday morning at Alpha Holdings Ltd., and the finance director, Zara, is ready to brief the board about three new investments.

Each potential deal involves buying shares in another company — but the percentage of ownership varies.

The challenge? Figuring out which IFRS standard applies.

Zara starts with BlueTech Ltd., where Alpha plans to invest 10%.
“We won’t influence their decisions,” she explains.
“This is a financial asset under IFRS 9.”

Under IFRS 9:

·       The investment is recorded at fair value.

·       Changes go through profit or loss (FVPL) or OCI (FVOCI) depending on the election.

📘 It’s just an investment for returns — not influence.

Next, Zara presents GreenWave Co., where Alpha will hold 30%.
“This time, we’ll have a say in decisions,” she tells the board.
“We have significant influence, but not control.”

Under IAS 28, Alpha must apply the equity method:

  • Record at cost initially.

  • Adjust for its share of profits or losses.

  • Deduct any dividends received.

Zara explains:
“If GreenWave earns $1 million, we recognise 30% ($300,000) in our books.”

Finally, Zara turns to RedStone Ltd., where Alpha will own 80%.

“This time, we call the shots,” she says.
“With control comes responsibility — this is a subsidiary under IFRS 10.”

Under IFRS 10, Alpha must consolidate RedStone’s accounts:

  • Combine assets, liabilities, income, and expenses line by line.

  • Show non-controlling interest (NCI) separately.

  • Eliminate intragroup balances. 

Before ending, Zara smiles and says:

“Accounting isn’t just about numbers — it’s about understanding relationships.
The more power we have over decisions, the deeper our reporting responsibility.”

Whether you’re an investor, accountant, or student — this story of Zara’s board meeting reminds us that ownership defines influence, and influence defines accounting treatment.

IFRS 9 – when you invest.
IAS 28 – when you influence.
IFRS 10 – when you control.

 

Arish Faisal

As an ACCA-qualified tutor and corporate trainer, Arish doesn’t just teach accounting and tax—he simplifies complex concepts into practical knowledge.

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