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Advise the directors of entity a

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Question - Entity A holds equity investments at fair value through profit or loss. Due to short-term cash flow shortages, Entity A sold some equity investments for $5,000,000 when the carrying amount was $4,000,000. The terms of the disposal state that Entity A has the right to repurchase the shares at any point over the next two years at their fair value on the repurchase date. Entity A has not derecognised the investment because its directors believe that a repurchase is highly likely.

REQUIRED - Advise the directors of Entity A as to the acceptability of the above accounting treatment. (You should enter 1 for acceptance or 0 for non-acceptance of the above accounting treatment.)

Reference no: EM131960097

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