Selling an FVOCI shareholding below fair value creates a strange result
Selling an investment for less than its fair value sounds like a straightforward loss.
You own shares worth £10 million. You sell them for £9 million. The obvious reaction is that the company has made a £1 million loss.
Under IFRS 9, however, the answer can become much less intuitive when the shares have been designated at fair value through other comprehensive income.
The difference between the fair value of the investment on the disposal date and the amount actually received may end up in other comprehensive income rather than profit or loss.
That has become a live IFRS Interpretations Committee issue in 2026.
For SBR candidates, it is a useful example of why financial instruments cannot always be understood by following the cash alone. Candidates working with an ACCA SBR tutor should focus on the logic of the FVOCI election, the treatment of fair value movements and what happens when the disposal price does not match the measured fair value.
Start with the unusual FVOCI election
IFRS 9 generally requires equity investments to be measured at fair value.
For an equity investment that is not held for trading, an entity can make an irrevocable election at initial recognition to present subsequent fair value changes in other comprehensive income.
This is often called the FVOCI election.
Once made, it changes where gains and losses appear.
Fair value movements go to other comprehensive income rather than profit or loss.
That is already different from an equity investment measured at fair value through profit or loss, where changes in value affect the income statement.
The distinction matters when the investment is eventually sold.
There is no normal recycling on disposal
One of the most important features of the IFRS 9 equity FVOCI election is what does not happen when the investment is sold.
The cumulative fair value gain or loss recorded in other comprehensive income is not subsequently recycled into profit or loss.
An entity may transfer the cumulative balance within equity, for example from an FVOCI reserve into retained earnings.
But it does not suddenly recognise the historic gain or loss in profit because the shares have been disposed of.
This can feel unfamiliar to candidates who are used to other situations where amounts accumulated in OCI eventually pass through profit or loss.
The reason is that the FVOCI election was designed so that fair value movements on these particular equity investments remain outside profit or loss.
That principle is important when considering the latest question.
The strange part appears when sale proceeds differ from fair value
Imagine a company owns a listed shareholding.
At the disposal date, the investment has a fair value of £10 million.
The company sells the shares for £9.5 million.
There is now a £500,000 difference between the measured fair value and the consideration actually received.
Where should that difference go?
One argument says the £500,000 should be recognised in profit or loss.
After all, the company had an asset measured at £10 million and received only £9.5 million when it disposed of it.
That looks like a realised disposal loss.
The alternative view is that the difference should remain within the FVOCI accounting model and therefore be recognised in other comprehensive income.
That is the issue the IFRS Interpretations Committee has been considering.
Why fair value and consideration can differ
At first glance, it may seem strange that the fair value of shares and their actual selling price would differ on the same date.
It can happen.
A company may sell a large block of shares and agree a discount from the quoted price.
The sale price might be determined using an average market price over a particular period rather than the spot price on completion.
There may be a premium or discount connected with the size of the holding.
A forced sale may produce different pricing.
Illiquid markets can also create complications.
There may also be a timing difference between agreeing the sale price and actually completing the transaction.
These situations are not necessarily common, but they are commercially plausible.
That is why the accounting question matters.
A block trade is a useful example
Suppose a company owns 20 million listed shares.
The quoted market price implies a fair value of £100 million.
The company wants to sell the entire holding quickly.
A buyer agrees to acquire the block for £96 million because taking such a large position creates risk and requires a discount.
The company has therefore received £4 million less than the investment’s measured fair value.
Economically, management may regard that £4 million as a disposal loss.
The accounting question is whether IFRS 9 allows that amount to appear in profit or loss when the original equity investment was designated at FVOCI.
This is where the classification decision made when the investment was first acquired continues to matter years later.
Current practice generally keeps the difference in OCI
The IFRS Interpretations Committee gathered evidence from standard-setters, accounting firms, regulators and preparers.
The feedback suggested that these differences are not particularly common.
Where they do occur, they are often not material.
More importantly, the outreach indicated relatively little significant diversity in practice.
The most common approach reported was to recognise the difference between disposal-date fair value and consideration received in other comprehensive income.
That is consistent with keeping the entire fair value movement associated with the FVOCI equity investment outside profit or loss.
The Committee therefore tentatively concluded that a standard-setting project is not required.
That conclusion is not yet a final agenda decision.
The consultation remains open until 30 November 2026.
Candidates therefore need to describe the position accurately rather than presenting a tentative conclusion as a newly issued amendment to IFRS 9.
Why profit or loss still feels tempting
The alternative argument is easy to understand.
Once the shares are sold, the transaction has happened.
The company has physically received less cash than the fair value previously reported.
It therefore seems reasonable to describe the difference as a disposal loss.
That treatment would also separate two different economic effects.
The earlier movement in the market value of the investment would remain in OCI.
The amount sacrificed through the specific sale transaction could then be treated as a new loss in profit or loss.
Conceptually, that has some appeal.
The problem is that it may weaken the original FVOCI presentation choice.
If part of the change in value reaches profit or loss simply because the actual consideration differs from the disposal-date fair value, the accounting starts to split the overall economic movement between two locations.
The question becomes whether IFRS 9 supports that split.
Current practice suggests that most entities do not make it.
The original designation still controls the accounting story
This is the wider lesson.
The accounting for disposal cannot be understood without going back to the original classification.
When the company elected FVOCI, it made an irrevocable decision about how subsequent fair value gains and losses would be presented.
That decision was not intended to disappear when the investment was sold.
If the investment had instead been measured at fair value through profit or loss, the presentation would be very different.
Fair value movements would already have affected profit or loss.
The final disposal difference would therefore sit within a model where changes in value are recognised through the income statement.
The FVOCI election deliberately creates a different reporting outcome.
Candidates should therefore resist the temptation to analyse only the final sale.
The history of the instrument matters.
Dividends are different again
Another common source of confusion is dividend income.
An equity investment designated at FVOCI does not mean everything connected with the investment is recognised in OCI.
Dividends are generally recognised in profit or loss where they represent a return on the investment rather than a recovery of part of its cost.
That means one investment can produce different accounting outcomes.
Dividend income may appear in profit or loss.
Fair value movements appear in OCI.
The cumulative OCI balance is not recycled to profit or loss on disposal.
And, based on the current tentative agenda decision, a disposal difference between fair value and consideration is generally also being recognised in OCI in practice.
This is exactly why candidates should understand the model rather than remember the phrase “FVOCI means OCI”.
There are still separate questions to answer.
Do not confuse equity FVOCI with debt FVOCI
This distinction is particularly important in SBR.
IFRS 9 also contains an FVOCI category for certain debt instruments.
The accounting is not identical.
For qualifying debt instruments measured at FVOCI, interest income, impairment and certain foreign exchange effects are recognised in profit or loss, while other fair value movements are recognised in OCI.
On derecognition, the cumulative gain or loss in OCI is generally reclassified to profit or loss.
That recycling contrasts with the elective FVOCI treatment for equity instruments.
Candidates who simply remember “FVOCI” without distinguishing debt from equity can therefore reach the wrong conclusion.
Always identify the type of instrument first.
Fair value measurement still happens before disposal
Another important point is the measurement of the investment immediately before it is derecognised.
The asset is still measured under IFRS 9 up to the disposal date.
That means a candidate should not simply compare the original purchase price with the cash received.
Suppose shares were bought for £6 million.
By the disposal date, their fair value has risen to £10 million.
They are then sold for £9.5 million.
The relevant accounting cannot be reduced to saying the company made a £3.5 million gain because it paid £6 million and received £9.5 million.
The investment has already been remeasured through OCI during the period it was held.
The accounting needs to reflect the fair value immediately before disposal and the separate difference between that value and the consideration received.
That sequence matters.
A simple numerical example
Assume a company buys an equity investment for £5 million and makes the irrevocable FVOCI election.
By the end of the following year, its fair value has increased to £8 million.
The £3 million gain is recognised in other comprehensive income.
Later, immediately before disposal, the fair value is £9 million.
A further £1 million fair value gain is recognised in OCI.
The cumulative OCI gain is now £4 million.
Suppose the company then sells the shares for £8.7 million.
There is a £300,000 difference between disposal-date fair value and consideration.
Under the approach commonly observed in the Committee’s outreach, that difference is also recognised in OCI.
The cumulative amount may then be transferred within equity, but it is not recycled into profit or loss merely because the investment has been sold.
That final step is what makes the outcome feel unusual.
Management should explain material disposal discounts
Accounting classification does not remove the commercial significance of a poor sale price.
Suppose management sells an investment materially below its quoted fair value.
Even if the resulting difference is recognised in OCI, investors may still want to know why the company accepted the discount.
Was the business under liquidity pressure?
Was it a forced sale?
Did management need to dispose of the holding quickly?
Was there limited demand for such a large block of shares?
Did the quoted market price genuinely represent the economics of the holding being sold?
Those questions can matter to users even where the accounting treatment is clear.
Good reporting should therefore distinguish between the location of the accounting entry and the commercial explanation of the transaction.
Governance matters where the discount is significant
A material difference between fair value and sale consideration should also attract board attention.
Management should be able to explain how the selling price was determined.
The audit committee may need to understand whether the transaction was genuinely at arm’s length and whether the disposal was properly authorised.
There may also be related-party considerations or wider questions about management stewardship.
A finance team should not hide behind the fact that the accounting difference is recorded in OCI.
If the company surrendered significant economic value, the board should understand why.
That is a useful professional marks angle in an SBR answer.
Technical accounting and governance can sit in the same scenario.
How this could appear in an SBR question
Imagine a group holds a strategic equity investment that was designated at FVOCI when acquired.
At year end, the quoted fair value is £12 million.
The board urgently needs cash and agrees to sell the entire holding to an institutional investor for £11 million.
The finance director proposes recognising the £1 million shortfall as a loss in profit or loss because it arose from the disposal rather than from market movements.
A weak answer might simply say that the shares are FVOCI and therefore all gains and losses go to OCI.
A stronger answer would explain the specific issue.
The investment was subject to the irrevocable equity FVOCI election.
The fair value should be updated to the disposal date.
Current practice identified through the IFRS Interpretations Committee’s 2026 consideration generally recognises the difference between disposal-date fair value and consideration received in OCI.
The candidate should also make clear that the Committee’s conclusion is currently tentative rather than a new mandatory amendment.
Finally, the answer could recommend that the board investigate and explain why a material discount from quoted fair value was accepted.
That is a complete professional response.
Do not turn a live issue into a final rule too early
Current issues require careful language.
The IFRS Interpretations Committee has tentatively decided not to add a standard-setting project because it did not find evidence that the matter has widespread effect.
That is not the same as the IASB issuing a new paragraph of IFRS 9.
The tentative agenda decision is open for comment until 30 November 2026.
The Committee will consider the responses before deciding how to proceed.
Candidates should therefore avoid writing that IFRS 9 has been amended.
A better phrase is that current outreach indicates common practice is to recognise the difference in OCI and that the Committee has tentatively concluded that no standard-setting project is necessary.
Accuracy about the status of developments is part of professional reporting.
Why this is a good SBR current issue
The subject is narrow, but it tests several useful skills.
You need to understand the original FVOCI election.
You need to distinguish equity investments from debt instruments.
You need to understand fair value measurement before derecognition.
You need to know that accumulated equity FVOCI gains and losses are not recycled through profit or loss on disposal.
You then need to apply that model when consideration does not equal fair value.
Finally, you may need to discuss why management sold below fair value and whether users require further explanation.
That is much richer than memorising a single accounting entry.
What candidates should remember
The easiest way to remember the issue is to start with the election.
If an eligible equity investment has been irrevocably designated at FVOCI, subsequent fair value changes are presented in other comprehensive income.
The accumulated amount is not recycled into profit or loss when the investment is sold.
The 2026 IFRS Interpretations Committee discussion asks what happens when the consideration received on sale differs from the investment’s fair value at the disposal date.
Evidence gathered so far suggests entities generally recognise that difference in OCI as well.
The issue is currently subject to a tentative agenda decision, not a newly amended standard.
Candidates following an ACCA SBR course should practise the issue using a short numerical scenario and then explain the conclusion in words.
That combination is more useful than memorising an isolated rule.
What to do next
Financial instruments often become difficult because one label hides several different accounting models.
FVOCI is a good example.
An equity instrument and a debt instrument can both carry the FVOCI description while behaving differently on disposal.
The solution is to slow the analysis down.
Identify the instrument.
Identify why it is measured at FVOCI.
Update it to fair value.
Consider what happens on disposal.
Then decide where the resulting gain or loss belongs.
The answer may feel strange when a company sells shares below fair value and the difference does not appear in profit or loss.
But accounting does not begin with whether the result feels intuitive.
It begins with understanding the measurement and presentation model the company chose when the investment was first recognised.
