Equity instruments held for trading?

This Equity instruments held for trading question is part of the decision model for the classification and measurement of financial assets, that started in the IFRS 9 Framework for financial assets. But you can also read it without doing the test …. off course?

OK the financial asset is an equity instrument.

Held for trading or not?

Financial assets acquired or held for the purpose of selling in the short term or for which there is a recent pattern of short-term profit taking are held for trading. Financial assets acquired or held for the purpose of holding for a longer period of time are not held for trading but as longer term investments.

Held for trading are a financial asset or a financial liability that:

  1. is acquired or incurred principally for the purpose of selling or repurchasing it in the near term;
  2. on initial recognition is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking; or
  3. is a derivative (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument).

A portfolio of financial assets that meets the definition of held for trading is not held to collect contractual cash flows or held both to collect contractual cash flows and to sell financial assets. For such portfolios, the collection of contractual cash flows is only incidental to achieving the business model’s objective. Consequently, such portfolios of financial assets must be measured at fair value through profit or loss. The objective of trading is generating a profit from short-term fluctuations in price or dealer’s margin.

Disclosure

Assets at fair value through profit or loss are presented showing separately

  1. those designated as such upon initial recognition or subsequently in accordance with IFRS 9 6.7.1 and
  2. those that meet the definition of held for trading in IFRS 9.

The question is: Is the equity instrument held for trading?

Yes / No


The FVOCI election is not available for equity instruments that are held for trading or contingent consideration recognised by an acquirer in a business combination. If an entity applies the FVOCI election, it does not assess these instruments for impairment and cannot reclassify in profit and loss gains or losses previously recognised in OCI on disposal of these instruments – also referred to as ‘recycling’.

Wikipedia info: Equity trader

stock trader or equity trader or share trader is a person or company involved in trading equity securities. Stock traders may be an agent, hedgerarbitrageurspeculatorstockbroker. Such equity trading in large publicly traded companies may be through a stock exchange. Stock shares in smaller public companies may be bought and sold in over-the-counter (OTC) markets.

Stock traders can trade on their own account, called proprietary trading, or through an agent authorized to buy and sell on the owner’s behalf. Trading through an agent is usually through a stockbroker. Agents are paid a commission for performing the trade.

Major stock exchanges have market makers who help limit price variation (volatility) by buying and selling a particular company’s shares on their own behalf and also on behalf of other clients.

See also: The IFRS Foundation

Equity instruments held for trading

Equity instruments held for trading

Equity instruments held for trading Equity instruments held for trading Equity instruments held for trading Equity instruments held for trading Equity instruments held for trading

Equity instruments held for trading Equity instruments held for trading Equity instruments held for trading Equity instruments held for trading The FVOCI election is not available for equity instruments that are held for trading or contingent consideration recognised by an acquirer in a business combination. The FVOCI election is not available for equity instruments that are held for trading or contingent consideration recognised by an acquirer in a business combination.