Are changes in fair value and investment income double counted for trading financial assets?

Debit: Fair value change gain or loss.

Credit: Investment income.

This entry is not, one is an increase in profits, and the other is a decrease in profits, flat.

It is only when the trading financial asset is disposed of, the profit or loss from the trading financial asset is transferred to the investment income account.

The difference between the fair value of a trading financial asset and its carrying balance at the balance sheet date:

Borrow: Trading Financial Assets - Changes in Fair Value.

Credit: Fair Value Gain or Loss.

The difference between the fair value and the book balance is reversed.

That is to say, the investment income of the trading financial assets is not recognized before the first time, and it is accounted for through the fair value change profit and loss account.

**When trading financial assets:

Borrow: bank deposits, etc.

Credit: Trading Financial Assets - Cost.

Credit or Borrow: Trading Financial Assets - Changes in Fair Value.

Loan or Borrow: Investment income.

At the same time, investment income is recognized through the fair value change profit and loss account

Borrowed or Credited: Fair Value Gain or Loss.

Loan or Borrow: Investment income.

If the fair value change profit or loss has been included in the profit, its balance is 0.

This business, another investment income, although the profit is not affected, one increase and one decrease, but the fair value change profit and loss needs to be pinched out of another data, the profit in the investment income there will also be one more increase, and then one more decrease, as if the income is high, the cost is also more, inflated, is not appropriate?

If the fair value change profit and loss is not included in the profit at all, but the investment income accumulated to the end, then there is no need for the fair value change profit and loss in the income statement? Isn't it enough to use just one investment income?

So I still don't quite understand, I hope someone can help, o(o thank you.

When a trading financial asset is disposed of, the fair value change gain or loss is transferred to investment income for two main purposes:

First, in order to better account for the income generated by investment, from the perspective of the entire business process, that is, from the perspective of the entire process of acquisition, subsequent measurement and disposal of trading financial assets, only the transfer of fair value change profit and loss to investment income can truly reflect the profit or loss of the business;

Second, because the fair value change profit or loss is a transitional account, the fair value change is uncertain, and there is a possibility of increase or decrease at any time, which is too unstable, and if the income is directly recognized, it is easy to cause the untruthfulness of the statement. However, after the disposal of the investment, the income generated by the investment has been determined, so the amount that has been accounted for in the transitional account "fair value change profit or loss" is transferred to the investment income, and the amount at this time is the real investment income. The "fair value change profit and loss" account and the "investment income" account are both profit and loss accounts, and the closing balance should be transferred to the "current year's profit" account, so the entries carried forward do not affect the current profit or loss.

Even so, when the trading financial assets are disposed of, the amount included in the fair value change profit or loss account during the holding period of the trading financial assets should still be transferred to the investment income account, because the "fair value change profit and loss" account and the "investment income" account are both profit and loss accounts, and the closing balance should be transferred to the "current year's profit" account. Therefore, this carry-forward entry does not affect the profit or loss for the current period.

If the investment income item is not transferred to the disposal year, it is not the amount actually incurred. Here's how I understand this question:1

Look at the arrangement of items in the income statement, and then consider the changes in the items in the two accounting periods before and after disposal. 2.First of all, in the year of non-disposal, if the fair value increases, the fair value change profit or loss account (income statement item) is on the credit side, so the income statement is reflected as an increase in profit, but it is not realized, and because it is not realized, there is no change in the investment income item.

3.Next, in the disposal year, the fair value change profit and loss account (income statement item) should be transferred to the debit side, reducing the profit, which is the figure already listed in the income statement of the previous year; As a result of the disposal of assets during the year, the profit has been realized, and the profit has also increased by the investment income item, which is the sum of the profit carried forward from the previous year and the realized profit of the current year. 4.

In the current year's income statement, the reduced profit (fair value change profit or loss debit) and the increased profit (investment income credit) are offset in the current year's statement (the fair value change profit or loss and investment income of the income statement are offset by the upper and lower lines), and the figures that have been realized for the year are left on the income statement. 5.In this comparison, it will be found that the realized profit (credit of the fair value change profit or loss account) of the previous year is left in the income statement of the previous year, and although the fair value change profit and loss is carried forward at the disposal of this year (but reflected on the debit side of the fair value change profit or loss account), and the investment income (credit) item reflects the profit of the two accounting periods, but because it is debited from the fair value change profit and loss of the previous line of the statement, although the fair value change profit or loss has been carried forward once in the previous period, it has to be carried forward again this year. In this way, there will be no problem of over-recording profits.

I hope my understanding will make sense.

Under the asset-liability view, it is not more practical to know how much of the unrealised investment gains and losses were realized in the current period and how much of the investment income was realized in the current period than to understand the contribution of trading financial assets to the company's net assets. Moreover, only the aggregate amount of investment income and fair value changes in trading financial assets can reflect the contribution of trading financial assets to the company's net assets. In addition, according to the provisions of China's tax law, only the actual realized investment income of an enterprise is taxed, and the unrealized income is not taxed.

Place. Therefore, in order to reflect the contribution of trading financial assets to the owner's equity of the enterprise in each accounting period, and to reflect the investment income realized in each period, and also to facilitate tax payment, this method is adopted in the accounting treatment, that is, after the first trading financial assets, the part of the fair value change profit or loss that was originally to be realized in the current period should be converted from fair value change profit or loss to investment income.

It should be noted that for the part that was originally realized as a fair value change in the current period, the conversion from fair value change gain or loss to investment income may occur in a subsequent year when the fair value change gain or loss is recognized. In this case, even though there is no balance in the fair value account, neither debiting nor crediting the fair value change gain or loss will affect the operating profit of the fair value change profit or loss in the year in which the fair value change gain or loss is realized. Because fair value change gains and losses and investment income are both components of operating profits, debiting investment income and crediting fair value change gains and losses, or debiting fair value change gains and losses and crediting investment income, will not affect operating profits, but the actual realized gains should be reflected through investment income.

Even if the change in fair value of a tradable financial asset in a previous year is adjusted for the portion realized in the current year, there is no need to adjust the profit of the previous year. This is because under the asset-liability view, the profit and loss of the previous year and the profit and loss of the current year are not overstated or underrecorded, but the realized profit or loss (fair value change gain or loss) and the realized profit and loss (investment income) are reflected through different items in the income statement.

For example, if the fair value of a trading financial asset** is 1w, dividends are received during the period, the fair value changes, and the selling price is what is our investment income?

Investment income = (

Among them, there is no problem for investment income.

At the time of selling, the accounting entries are:

Borrow: Bank deposit.

Credit: Transactional Financial Assets – Cost 1

Change in fair value.

Investment income = (From the above, it can be seen that if the fair value change profit and loss is not included in the investment income, the investment income will only be 1w, so in order to ensure the accuracy of the investment income, the fair value change profit and loss is included in the investment income, and the following entries are available.

Debit: Fair value change gain or loss.

Credit: Investment income.

I hope it can help you, and if you have any questions, thank you!!

Other comprehensive income from other debt investments is transferred to investment income when it is transferred out, if anyOther Equity InstrumentsOther comprehensive income from investments cannot be transferred to investment income when transferred out, but can only be transferred to retained earnings.

Whether it can be transferred to investment income depends on whether the other comprehensive income of the investee can be transferred to profit or loss, the other comprehensive income of the investee can also be transferred to profit or loss (investment income) when it is transferred out, and the other comprehensive income of the investee cannot be transferred to profit or loss when it is transferred out, and the other comprehensive income of the investor cannot be transferred to profit or loss, but can only be transferred to retained earnings.

Other comprehensive income refers to the gains and losses that are not recognized in the profit or loss for the current period in accordance with other accounting standards. There are two categories:

1.Other comprehensive income (transferred to retained earnings) that cannot be reclassified into profit or loss in subsequent accounting periods

1) Changes resulting from the remeasurement of net liabilities or net assets of defined benefit plans.

2) Other comprehensive income that cannot be converted into profit or loss under the equity method.

Investments in other equity instrumentschange in fair value.

Reflects changes in fair value of investments in non-trading equity instruments designated by the enterprise as measured at fair value through other comprehensive income.

4) Changes in the fair value of the enterprise's own credit risk.

It reflects the amount of financial liabilities designated by the enterprise as measured at fair value through profit or loss, and included in other comprehensive income due to changes in fair value caused by changes in the enterprise's own credit risk.

2.Other comprehensive income that will be reclassified into profit or loss in subsequent accounting periods when the specified conditions are met

1) Other comprehensive income from transferable gains or losses under the equity method.

2) Changes in the fair value of other debt investments.

Reflects the change in fair value of debt investments classified as measured at fair value through other comprehensive income. When an enterprise reclassifies a financial asset measured at fair value through other comprehensive income as a financial asset measured at amortized cost, or reclassified as a financial asset measured at fair value through profit or loss, the amount of accumulated gains or losses previously included in other comprehensive income transferred from other comprehensive income is a deduction for the item.

3) The amount of financial assets reclassified into other comprehensive income.

Reflects the difference between the original book value and fair value of other comprehensive income when an enterprise reclassifies a financial asset measured at amortized cost to a financial asset measured at fair value through other comprehensive income.

4) Other credit impairment provisions for debt investments.

Reflects the provision for losses on financial assets (i.e., other debt investments) classified as measured at fair value through other comprehensive income.

5) Cash flow hedging reserves.

Reflects the portion of the gains or losses generated by the company's hedging instruments that are effectively hedged.

6) Differences in translation of financial statements in foreign currencies.

7) Other comprehensive income recorded in the difference between the fair value and the book value when the self-occupied real estate is converted to investment real estate measured under the fair model.

During the investment period, the rise and fall of a trading financial asset is not a real investment income, so in order to distinguish investment income, the rise and fall are included in the fair value change profit or loss. Therefore, changes in fair value are transferred to investment income when the investment is disposed of.

It is part of a portfolio of identifiable financial instruments that is centrally managed in accordance with the Accounting Standards for the Recognition and Measurement of Financial Instruments, and there is objective evidence that the portfolio has recently been managed by the company on a short-term profit-making basis. For example, if the company purchases a batch of ** for short-term profit, the portfolio should be used as a trading financial asset.

"Accounting for the difference between the fair value and the carrying amount of the trading financial asset at the balance sheet date, if the fair value of the trading financial asset is lower than the carrying amount at the balance sheet date, the difference between the fair value of the trading financial asset and the fair value of the trading financial asset shall be debited and the "fair value change of the trading financial asset" shall be credited, and the opposite entry shall be made.

**In the case of a trading financial asset, it shall be transferred to "investment income" according to the change in fair value of the trading financial asset, i.e. the balance of the "fair value change profit or loss" account.

The "Trading Financial Assets – Changes in Fair Value" account is used to account for the difference between the fair value and the carrying amount of a trading financial asset at the balance sheet date.

If the fair value of a trading financial asset is less than the carrying amount, the accounting entries are as follows:

Credit: Gains or losses on changes in fair value, Credit: Trading Financial Assets - Changes in the value of the limbs at fair value.

If the auction value of a trading financial asset is higher than the carrying amount, the accounting entries are as follows:

Borrow: Trading Financial Assets - Changes in Fair Value, Credit: Gains or Losses on Changes in Fair Value.