Gains and losses on a financial instrument
How are gains and losses on a financial instrument be measured?
A gain or loss on a financial asset or financial liability that is measured at fair value should be recognised in profit or loss account. For an investment in equity instrument, which the entity has elected to present gain or loss on that investment in other comprehensive income, then gains or loss on such investments should be recognised in other comprehensive income. Dividends are recognised in profit or loss account when the entity’s right to receive payment of dividend is established and it is probably that the economic benefits will flow to the entity and the amount of dividend can be measured reliably. The gain or loss on financial assets measured at amortised cost not forming part of hedging relationship should be recognised in profit or loss when the financial asset is derecognised. It should also be declassified from amortised cost to fair value through profit or loss through the amortisation process. When a financial asset is declassified out of the amortised cost measurement category, then another gain or loss arising from the difference between the amortised cost of the financial asset and the fair value is recognised in profit or loss.