Impairment of Equity Investments

Facts of the case:
The company is in the process of adoption of IND AS Financial statements from the FY 2018-19. The company has investments in equity shares brought at the face value of the shares. Investee company is in the process of strike-off. The management of the company want to provide 100% of the carrying amount as provision for impairment in its opening balance sheet as on 1 April 2017. Both the companies are not related parties.

Issue/Query:
Can the company provide 100% face value of investments in the public company under process of strike off.

Response:
In accordance with paragraph 4.1.4 of Ind AS 109 Financial Instruments, investment in equity shares of another company shall be measured at fair value with changes in fair value being recognised either in profit or loss or in other comprehensive income. As the investee company is not a going concern, there cannot be any reason to hold on to those shares in long term. Therefore, the investment in shares will be classified and measured at fair value through profit or loss. As the shares are measured at fair value through profit or loss, no provision for impairment can be recognised. The fair value of the investment considers any impairment and the same is recognised in retained earnings on transition date.