FVPL

Classification Initial Subsequent

Held for trading FV only UG/UL-P/L

Irrev. FVPL FV only UG/UL: OCI (no acctg mismatch)

P/L (with acctg mismatch) attributable to credit risk
Remaining balance: P/L

Transaction cost is expensed outright

Hedge Acctg Hedging instrument Hedged Item

(variable-fixed) Cash flow hedge Effective portion- FVOCI As usual accounting
Ineffective portion- FVPL
(fixed-variable) Fair value hedge FVPL FVPL
 FLAC
Derecognition Kinds of FL@AC Recorded in books
G or L: P/L Bonds payable Face amount
Notes payable Face amount
G or L: Retained Earning Loans payable Face amount

Computation of G/L Initial Recognition:

Consideration paid xx Fair value xx
FV @ prev. reporting date (xx) * Transaction cost (xx)
G or L xx Initial Carrying amount xx

Subsequent Recognition
amortization table should be used

Scheme ER vs NR
at a premium ER < NR
at a discount ER > NR
at face amount ER = NR

Derecognition

Payment of Debt: on maturity

prior to maturity

Debt Restructuring Total Liability

CA/Fair value
G/L on extinguishment

DR: Modification of terms

Testing: If G/L (PV using old rate)
10% or more
less than 10%
 FLAC
External Documentation
Bond contract/prospectus * Examples:
acknowledgement from creditor Cost of certificate
Loan agreement Legal & accounting services
Registration fee
Commissions to underwriters

EIR given, Cash price equivalent given, Face amount ** Except if serial bonds, notes, loans
Direct issuance cost or direct origination fees *** Premium on B/L/N - Premium amort
If problem is with transaction cost & CPE, **** Discount on B/L/N - Discount amort
use interpolation to find the new EIR ***** Order of priority of fair value in equity swap
(1) Fair value of equity instruments issued
(2) Fair value of liability extinguished
(3) CA of liability extinguished
**
Maturity Value Net Carrying Value
Face Amount Face Amt + Premium ***
Face Amount Face Amt - Discount ****
Face Amount Face amount

Settlement price = CA; no Gain or Loss

Settlement price: xx
CA on settlement date (xx)
Gain or Loss xx

xx (Notes/Bonds/Loans + accrued interest payable)

(xx) CA if asset swap; Fair value if equity swap *****
xx

ing old rate)

Extinguishment of old FL with G/L
Continue, new EIR no gain or loss
alue in equity swap
struments issued
xtinguished