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Reflection - Investments and Inventories

- Ayala Land's investments consist of equity securities classified into different categories: financial assets at fair value through profit and loss, financial assets at fair value through other comprehensive income, investments in associates and joint ventures, and properties held solely for investment purposes. - Financial assets at fair value through profit and loss include ARCH Capital fund and Unit Investment Trust funds, which are held for trading or to generate liquidity/stable income. The value of these funds changed from 2018 to 2019. - Financial assets at fair value through other comprehensive income include quoted and unquoted stocks from industries like real estate, tourism, and utilities, which increased in value from 2018 to 2019 primarily due to unrealized gains. -

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169 views

Reflection - Investments and Inventories

- Ayala Land's investments consist of equity securities classified into different categories: financial assets at fair value through profit and loss, financial assets at fair value through other comprehensive income, investments in associates and joint ventures, and properties held solely for investment purposes. - Financial assets at fair value through profit and loss include ARCH Capital fund and Unit Investment Trust funds, which are held for trading or to generate liquidity/stable income. The value of these funds changed from 2018 to 2019. - Financial assets at fair value through other comprehensive income include quoted and unquoted stocks from industries like real estate, tourism, and utilities, which increased in value from 2018 to 2019 primarily due to unrealized gains. -

Uploaded by

John Christopher Gozun
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© © All Rights Reserved
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The investments of Ayala Land inc.

and subsidiaries mainly consist of equity securities


classified as financial assets at fair value through profit and loss, as financial assets at fair
value through other comprehensive income, investment in associates and joint ventures
and properties that are solely hold for investment purpose only.

For the financial assets through profit and loss, these are financial assets recorded at its
fair value and any cost incurred are recorded as an expense in the income statement, any
changes in the fair value will be recorded as unrealized gain or loss in the income
statement and adjustments will also be done in the asset side of the statement of financial
position. In the case of Ayala, it primarily composes of two investments namely ARCH
Capital fund and Unit Investment Trust funds. Investment in ARCH Capital as shown in the
notes in financial statements is particularly a portfolio manage by professionals which are
hold for trading purposes and for the collection of the interest provided by different type of
funds that they have purchased. While the investment in Unit Investment Trust are funds
that aims to generate liquidity and stable short-term fixed income with no minimum
holding period requirement by investing in a diversified portfolio which the intention of
the company is to reduce the overall risk for the company. In comparing the investments in
2018 and 2019, the ARCH Capital fund seems to have a lesser amount compare to the
previous year and this is primarily cause by unrealized lost in asset revaluation in the year,
while the investment in Unit Investment Trust funds has significantly increase its value in
2019 by having unrealized gain in asset revaluation in the year and additional purchase of
funds by the company.

On the other hand, financial assets at fair value through other comprehensive income
are financial assets recorded at its fair value plus any transaction cost incurred during the
purchase of the funds, any changes in the fair value will be recorded as unrealized gain or
loss in the statement of comprehensive income and adjustments due to the changes in fair
value will be recorded in the equity side of the statement of financial position. In the case of
Ayala, it composes of two kinds of stock namely quoted and unquoted, and both have
composed of stock from different industries such as real estate, tourism and leisure,
financial asset management, retail, utilities, and telecommunication. The investment
through FVOCI of Ayala Land in 2019 have significantly increase as compare to the
previous year, it is primarily caused by the unrealized gain in the fair value of the quoted
shares of stocks of the company. However, in a closer look, Ayala has been suffering
cumulative unrealized loss due to the changes in fair value for the pass years, it is only
evident that there is unrealized gain in 2018, but company still suffer unrealized loss in the
current year. Therefore, the Ayala group needs to take into consideration whether they
should continue to withhold these shares of stock or not.

As to the nature of the business of Ayala land it is no doubt that its inventories are
consist of land and real estate. In the notes of the inventories of Ayala, it has primarily
disclosed Real estate and Office in its inventory, and under the Real estate account, it has 2
subcategories which are residential for condominium units and commercial lots. It was
noted that the cost of its inventory for both Real estate and Office are consists of Land
acquired during the year or the cost in purchasing land, construction/development cost
incurred or cost in building their projects, borrowing costs capitalized, disposals or
recognizes as the cost for the real estate sales, and lastly the transfer from(to) investment
properties wherein this is the account when company decided to transfer land from the
investment account to the inventory and held for sale or transfer the land from inventories
to investment and held for investing purpose only. Aside from that, Ayala also valued their
inventories at cost.

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