TOPIC 28: FINANCIAL ASSET AT  Under the FV option, all changes in the fair value are
AMORTIZED COST recognized in P &L.
 Any transaction cost is part of the cost of financial
asset measured at amortized cost
 Under the effective interest method, the interest
income is computed by multiplying the carrying
amount by the effective rate
 The nominal/stated rate is used in computing accrued
interest or interest receivable
TOPIC 29: MARKET PRICE OF BONDS
 In computing the market price of term bonds; get the
present value of the nominal interest payments using
the yield/effective rate and the PV of the principal
using also the yield-effective rate and add the two
PVs to get the market price.
 If there is discount, ER>NR
 If there is premium, ER<NR
 Serial bonds are those that mature in installments
 Formula to get the PV of a serial bond:
(Installment payment + Nominal interest payment)
(Present value of 1)
TOPIC 30: BOND INVESTMENT-
FVOCI/FAIR VALUE OPTION
 If the business model is to collect contractual cash
flows (primarily for principal and interest) and to sell
the financial asset, it is recorded at the FV through
OCI
 In this case, interest income is recognized using the
effective interest method as in amortized cost
measurement
 On derecognition, the cumulative gain/loss in other
comprehensive income shall be reclassified to profit
or loss
 The increase in unrealized gain is reported in the
statement of comprehensive income but the
cumulative unrealized gain is reported in the
statement of changes in owner’s equity
 PFRS 9 provides that an entity at initial recognition
may irrevocably designate a financial asset as
measured at FVTPL even if the said FA satisfies the
amortized cost measurement
 Moreover, under the FV option, the interest income
is based on the nominal interest rate rather than using
the effective rate. There is no discount/premium
amortization.
TOPIC 31: INVESTMENT PROPERTY
 Only land and building can qualify
 If the investment property is accounted for under the
fair value model, no depreciation is recognized.
 If accounted for under the cost model, depreciation is
to be computed.
 Property held by a subsidiary in the ordinary course
of business is included in the subsidiary’s inventory
 A land leased by the parent company to its subsidiary
under an operating lease is an owner’s occupied
property for purposes of consolidated financial
statements.
 However, from the perspective of the separate
financial statements of the parent such asset is an
investment property
 Movable property like machinery cannot qualify for
investment property
TOPIC 32: FUND AND OTHER
INVESTMENTS
 Any income earned on the sinking fund investments
should form part of the sinking fund balance
 The annual deposits to the fund and the interest
earned on those deposits should form part of the non-
current sinking fund
 The future value factor of an annuity due is used if
the annual deposits are made at the beginning of each
year
 Annual deposit to a fund is computed by dividing the
amount of the fund by the future value factor
 Increase in the cash surrender value decreases life
insurance expense
 Gain on Life Insurance Settlement:
Proceeds
Less: Cash Surrender Value
Unexpired Life Insurance