Part 1

GED (Pty) Ltd (GED) is a Namibian company that offers tailor-made healthcare solutions exclusively for graduate professionals. The history of GED is a dynamic story of how the vision of a few pioneering professionals laid the groundwork of what has become the largest multidisciplinary group of graduate professionals in the world. GED has a financial year-end of 31 December and elected to early adopt the latest version of IFRS 9 Financial Instruments from the 2015 reporting period.

As part of their successful business model, which mainly consists of providing healthcare insurance, GED uses any of their surplus funds in lucrative share investment opportunities to ensure continued growth of their cash reserves by investing the funds in the short term and realising dividends and ultimately profits when the shares are sold.

During the current financial year, GED identified another investment opportunity that would enable them to earn a good return in the short term. An investment company in South Africa, First Mutual (Pty) Ltd (FM), had a drop in their share price over the last few months. In an attempt to increase its share price, FM developed various new unique products that should increase the companys revenue and market share and, in turn, its share price. Based on the extensive media coverage FM received for its new products, GED decided to purchase 50 000 ordinary shares in the company on 5 January 2020 while the share price was still low and to sell them in future when the share price has increased again. GEDs shareholders will receive ordinary dividends while they own the shares and GED expects that the investment will grow in value due to the new FM products.

GED elected to classify these shares as a financial asset at fair value through other comprehensive income in their financial records on 5 January 2020. GED also initially made an irrecoverable election to account for any fair value adjustments in this investment in other comprehensive income.

REQUIRED:	MARKS
	Sub total	Total
Discuss whether GED (Pty) Ltd correctly elected to classify the investment of 50 000 ordinary shares in First Mutual (Pty) Ltd as a financial asset at fair value through other comprehensive income in terms of IFRS 9 Financial Instruments in its individual financial records for the financial year ended 31 December 2020. Your discussion should include recommendations, if any, toward the correct classification of this investment in terms of IFRS 9 Financial Instruments. Do not include any classification principles in terms of IAS 32 Financial Instruments: Presentation. Ignore taxation. Communications skills logical argument	9 1	10
Total marks		10