Chapter 2 - FI-A

12/27/2022
Chapter 1 (1.1)
Financial instruments: Oveview
Nguyễn Thị Thu Hiền
Contents I. Dinh nghia va phan loai

1. Overview & definitions (part A)
1. Dinh nghia
2. Classification (part A)
3. Accounting for financial assets (part A)
Cong cu tai chinh (finalcial intervesment) la hop
4. Accounting for debt & equity (part A)
5. Accounting for compounds (part A)
dong co 2 ben lien quan
6. Accounting for derivaties (part B) - Ben A: Ben phat hanh cong cu (No TC, VCSH
7. Hedge accounting (part B) (CCV), CC phuc hop (CCV + NTC)=> Ben nhan dau
tu ( Invester) => Co nhu cau ve von
=> ghi nhan ( hop dong CCTC) No tai chinh hoac/va
Con cu von (VCSH)
2
- Ben B: Ben nam giu cong cu TC => Nha dau tu
(Investor) => Ben cung cap von => ghi nhan la TS
TChinh
Vi du: A phat hanh trai phieu, B mua trai phieu

A => ghi nhan NPT phat hanh TP => No tai chinh
B => Dau tu vao trai phieu cua A => TS tai chinh
Vi du 2: A phat hanh co phieu pho thong cho B
A => ghi nhan Von gop CP => VCSH => cong cu
von
B Dau tu vao co phieu cua A (Tai san) => Tai san tai
chinh
https://www.youtube.com/watch?v=hdd58yZ_fLE&list=RDC
MUC1VAL4j9yiPQVKMtIS1yUOA&index=3 3
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1.2. Tai san tai chinh 12/27/2022
1. Tien:
- Tien mat
- TGNH
2. Dau tu vao cong cu von cua DN khac
I. Financial instrument - Co phieu
3.Quyen theo hop dong:
Contract - a, Nhan tien/ TSTC khac
- b, Quyen theo hop dong trao doi cc TC trong
(2) dieu kien co loi
(1) 4. Hop dong thanh toan = CCV (Co phieu cua
(3)
chinh DN
a. Phi phai sinh: DN co nghia vu nhan mot
luong thay doi ccv cua chinh doanh nghiep
Liabilities or assets that are not contractual are not financial liabilities or b. Phai sinh: duoc thanh toan khac voi viec trao
financial assets:
Examples: income tax liabilities (IAS 12), constructive obligations (IAS 37)
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doi:
- 1 ben trao doi 1 so tien co dinh hoac 1 luong
co dinh TSTC khac (Vang, trai phieu chinh
phu,... Thanh khoan cao)
- Lay mot so luong co dinh co phieu co dinh
CCV (CP cua DN)
Financial asset
(4) Contract settled in the
1.3 No Tai chinh
entity’s own equity instruments
(2) Equity (3)Contractual right
(1) instrument to:
and is:
1. Nghia vu theo hop dong
Cash ✓ (a)A non-derivative =>
of another ✓ (a)Receive
obligation to receive a
entity cash/another FA
variable number of entity’s
- Nghia vu chuyen giao tien hoac TSTC khac
✓ (b)Exchange FI
with another
own equity instruments
✓ (b)A derivative => settled
Phat hanh TP, di vay, tra no nha CC, thuong
entity (favorable
cash
shares conditions)
other than by the exchange
of fixed amount of
phieu phai tra
Trade receivables
cash/another FA for fixed of
own EI
b, Trao doi CCTC trong dieu kien bat loi
Loans receivable
Purchased call options
Transactions in own equity
Purchased put options VD: DN (Ben phat hanh quyen chon: Co
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nghia vu thuc hien quyen chon khi ben nam
giu thuc hien quyen chon) phat hanh 1000
quyen chon mua co phieu cua DN X
Gia thuc hien quyen chon 2$/cp
Gia TT CP cua DN X : 2,5$/CP
=> DN bat loi ( Vi ngta co quyen mua gia co
Financial liability phieu X tu DN minh voi gia thap hon gia tt) =>
No Tc
(2) Contract settled in the entity’s
(1)Contractual obligation to:
own equity instruments and is
(a) A non- derivative => obligation to 2. Hop dong TT bang CCV (CPhieu) cua
deliver a variable number of entity’s
(a)Deliver cash /
another financial
(b) Exchange FI with
another entity
own equity instruments chinh DN
(b) A derivative => settled other than
asset (unfavorable conditions)
by the exchange of fixed amount of
cash/another FA for fixed number of
a, Hop dong phi phai sinh
Trade payables Written call options
own EI
DN co nghia vu chuyen giao: 1 luong
Transactions in own equity thay doi CCV cua DN
Loan payables Written put options
Vi du: DN cam ket tien no nha cung cap
6 100.000 USD bang CP cua chinh DN
theo gia TT tai thoi diem TT
4$ mot CP => So luong CP: 25.000 CP
5$ mot CP => So luong CP: 20.000 CP
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Condition for Recognition as Equity the Perspective of

an Issuer
b. HD phai sinh duoc thanh toan Khac
Classification as equity
voi viec trao doi
instrument (IAS 32:16)
-- 1 ben trao doi 1 so tien co dinh hoac 1
(1) Instruments include no
contractual obligation to
(2) Instrument settled in
issuer’s own equity
luong co dinh TSTC khac (Vang, trai
instruments
phieu chinh phu,... Thanh khoan cao)
(a) Deliver (i)
cash or (ii)
(b) Exchange
financial assets
(a)Non-derivative (b)Derivative
instrument that will
- Lay mot so luong co dinh co phieu co
that include no
another financial
asset to another
or liabilities with
another entity
contractual
obligation to
be settled by
exchanging a fixed
dinh CCV (CP cua DN)
entity under potentially deliver a variable amount of cash/ FA
unfavorable number of own for a fixed number of
conditions equity instrument its own equity
instrument 1.4. Cong cu von cua DN do Doanh
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nghiep phat hanh
VCSH gom 3 phan:
- CCV do DN phat hanh
- Tu KQ KD de lai cho DN (Cac quy
LN giu lai)
Liability & equity
- OCI <= Dieu kien ben ngoai
(i) Contractual obligations to deliver cash or another FA to the 1. CC von do DN phat hanh ma DN
holder of an instrument khong co nghia vu
(ii) Instruments settled in an entity’s own equity instruments a, Chuyen tien/ TSTC khac cho doi tac
DN phat hanh
- CP pho thong (cp thuong) => nam giu
quyen bieu quyet => DN quyet dinh tra
co tuc/ hoan von
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- CP uu dai (khong co quyen chuyen doi
va co tuc khong luy ke)
b, khong co nghia vu trao doi cctc trong

i. Contractual obligations to deliver cash of another FA
dieu kien bat loi (Tu tim hieu/ tuan sau
to the holder of an instrument hoi)
i-1. redeemable shares – a fixed redemption date or redemption at the holder’s
2. Hop dong thanh toan = CCV (Co
discretion typically results in liability classification.
i-2. mandatory dividends – a contractual obligation exists where distributions on phieu) cua chinh DN
an instrument are not at the issuer’s discretion. Distributions of a specified Phi phai sinh: DN khong co nghia vu
percentage of profits – distributions are not at the issuer’s discretion where the
terms and conditions of an instrument contain a formula under which a specified
chuyen giao 1 luong thay doi CCV cua
percentage of profits must be paid to the holder DN (SV tu lay VD => Cong diem)
Hop dong phai sinh: se duoc thanh toan
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bang cach trao doi voi doi tac: so tien co
dinh hay 1 luong co dinh TSTC khac de
lay mot so luong co dinh CP of chinh DN
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i-1. Redeemable shares VD: DN phat hanh mot hop dong ky han
Example: Shares redeemable at the holder’s option: (Phai tren 2 ngay) : mua 100.000 CP
Entity A issues 1,000 shares with a par value of Currency Unit (CU)
100 each. The holder of the shares has the option to require Entity A to
cua chinh doanh nghiep voi gia 200.000
redeem the shares at par at any given time.
-> These shares are classified as liabilities. This is because Entity A
does not have the ability to avoid the obligation to redeem the shares TT gop
for cash should the holder exercise his option to redeem the shares. DN ---- 100.000 CPDN--->Dtac
-> If the option to redeem the entity’s shares had instead been at the
discretion of the issuer, the shares would have been classified as <---200.000 $ ---------
equity. In this situation, the issuer has a right to pay cash to buy back
the shares but no obligation to do so.
=> VCSH
TT rong
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DN ---- 100.000 x2,5 CPDN --->Dtac
<---200.000 $ ---------
=> Phai tra 50.000 => No TC
DN ---- 100.000 x1,8 CPDN --->Dtac
i-2. Shares with mandatory dividend payments
<---200.000 $ ---------
Where shares are non-redeemable, classification will depend on the other
rights attaching to them
=> Doi tac phai tra cho ta 20$ => Tai
It will often be clear from the terms and conditions attaching to an ordinary san tai chinh
share that there is no obligation to pay cash or other financial assets, and that
it should therefore be classified as equity.
non-redeemable preference shares: the classification depends on a careful
analysis of the other rights attaching to them: whether cumulative or non-
cumulative are:
- at the discretion of the issuer, the shares are equity instruments.
- mandatory the shares will be classified as financial liabilities.
Example: An entity issues preference shares with a par value of CU

100 each. The preference shares are non-redeemable but require the
entity to make annual dividend payments equal to a rate of 8% on the
par amount.
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ii. Instruments settled in an entity’s own equity instruments
Non-derivatives Derivatives settleable in

settleable in an entity’s an entity’s own equity
own equity instruments instruments
Apply the “fixed for fixed

Apply the “fixed test”
test”
Classification process for instruments settled in an

entity’s own equity instruments
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(a) Apply the “fixed test”
1) A contract to deliver a variable number of own equity instruments equal in value to

a fixed monetary amount on the settlement date is classified as a financial liability.
Example: Shares used as currency
Entity A issues an instrument for which it receives CU 100,000. Under the terms
of the issue, Entity A will repay the debt in 3 years time by delivering ordinary
shares to the value of CU 115,000. Entity A is using its own shares as currency,
and the instrument should therefore be classified as a financial liability.
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(a) Apply the “fixed test”
2) A contract to deliver as many of the entity’s own equity instruments as are equal in
value to the value of 100 ounces of a commodity results in liability classification of
the instrument.
Example: Shares to the value of a commodity
Entity B issues preference shares for CU 1,000. The shares pay no interest and will
be settled in three years time by Entity B delivering a number of its own ordinary
shares (which are correctly classified as equity) as are equal to the value of 100
ounces of gold.
The shares must be classified as financial liabilities as the delivery of ordinary

shares to the value of 100 ounces of gold represents an amount that fluctuates in
part or in full in response to changes in a variable other than the market price of the
entity’s own equity instruments. 14
(b) Apply fixed for fixed test

Test failled Test passed
Treated as normal
Treated as equity
derivatives
Within the scope of Within the scope of

IFRS 9 IAS 32
Derivative recognised
on balance sheet at fair Any consideration paid/
value with changes in received is deducted/
fair value recognised added to equity. Changes
through profit or loss in fair value not recognised
The fixed for fixed test is therefore typically crucial when an entity issues
(i) a convertible bond or 15
(ii) share warrants or options.
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Example: Call share option that meets the definition of equity
An issued share option that gives the counterparty a right to buy a fixed
number of an entity’s shares for a fixed amount of functional currency is
an example of an instrument that meets the fixed for fixed test.
Note however that equity classification applies only if the contract can be
settled only by ‘gross physical settlement’ – in other words by actual
issuance of shares for cash.
For the entity that has issued the option, the contract is an equity instrument
as it will settle it by issuing a fixed number of its own equity instruments in
return for a fixed amount of cash.
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Example: Call share option that fails the definition of equity
An entity issues a share option that gives the counterparty a right to buy a
number of shares for a fixed price. Under the terms of the option
agreement, however, the number of shares that the counterparty obtains
by paying the exercise price varies according to the level of sales that the
entity achieves. The option fails the fixed for fixed test as it is over a
variable number of the entity’s shares. The definition of equity is not met,
and the option will therefore be accounted for as a derivative in accordance
with the requirements of IFRS 9.
It should be noted however that if share options are issued in exchange for goods or
services, then IFRS 2 ‘Share-based Payment’ would apply. The fixed for fixed test is
not then relevant.
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II.Classification 2. Phan loai TSTC - NPT tai chinh

( IFRS 9)
1. Classification for financial assets
2. Classification for financial liabilities a, Phan loai TSTC:
CCTC + TSTC do luong theo gia goc phan bo:
- CC no AC => chi bao gom cong cu no voi dieu
- CC von kien thoai man yeu cau kiem tra dac
- CC phuc hop trung dong tien (Theo hop dong) - IFRS
- CC phai sinh 9 ; Muc dc nam giu TSTC cua DN: thu
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ve DTien trong tuong lai theo hop dong
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1. Classification of FA
+TSTC do luong theo GTHL voi chenh
Căn cứ phân loại CCTC lech GTHL duoc dua vao ket qua KD
Business model trong ki (P/L)-FVPL => Co the bao gom
Mô hình kinh doanh Cơ sở đo lường CCTC tat ca cac loai TSTC: CCN, CCV,
- Fair value
- Amortised cost
CCPH, CCPS
Contractual cash flows
Đặc trưng dòng tiền Muc dich doanh nghiep nam giu:
-De kinh doanh (hang hoa) - thoi gian
nam giu ngan han, mua di ban lai kiem
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loi tu chenh lech GB - GM
-DN lua chon cung voi no tai chinh vao
nhom FVPL (khong co lai lo)
+ TSTC do luong theo GTHL(FV) chenh
lech GTHL duc dua vao VCSH: OCI
Đo lường CCTC FVOCI
• Giá trị hợp lý (Fair value): giá nhận được khi bán một tài sản hay để
Bao gom: CC no va CC von
thanh toán một khoản nợ phải trả trong giao dịch thông thường giữa các
bên tham gia thị trường tại ngày đo lường.
Muc dich nam giu : Vua de nam giu lau
• Giá gốc phân bổ (Amortised cost) của TSTC hay NTC là giá trị mà
dai vua de ban khi can thiet khi co nhu
TSTC hay NTC này được đo lường khi ghi nhạn ban đầu trừ giá trị gốc
đã hoàn trả, cộng/hay trừ khấu hao lũy kế theo lãi suất thực của chênh
cau thanh khoan
lệch giữa giá trị ghi nhận ban đầu và giá trị khi đáo hạn, và trừ đi bất cứ
khoản thổn thất không thu hồi được.
• Lãi suất thực (The effective interest) là lãi suất để chiết khấu
2.2 Phan loai no TC: 2 nhom
các khoản phải trả hay thu về trong tương lai của CCTC tính
cho cả kỳ hạn của CCTC hay khi thích hợp tính cho kỳ ngắn
+ No Tc do luong FVPL => De kinh
nhất về giá trị ghi sổ ròng của CCTC doanh CCPS (GTHL, lai lo dua vao P/L)
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+ No TC do luong theo AC (gia goc phan
bo)
Di vay
Phat hanh TPhieu
1. Classification of FA
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(1) Contractual Cash Flow Characteristics Test
• The debt instrument meets the contractual cash flow

characteristic test when the contractual terms give rise to
payments of principal and interest only on specified dates.
– The principle and interest payments should be for credit
risk and time value of money in a lending arrangement.
The payments could include compensation for liquidity
risk and profit margin
– If the payments are related to other volatilities and risks
such as equity price risk, commodity price risk or
volatility risk, the debt instrument would not satisfy the
contractual cash flow characteristic test.
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Contractual cash flow test
Debt => Cash flows on specified dates that are solely principal + interest
time value credit risk

INTEREST = consideration for the
of money
✓ Fixed rate loan => 10 mil; 4% ꭕ Convertible bond => can be
✓Floating rate loan => 10 mil; 3M LIBOR +1% converted to equity
✓Zero coupon bond => At discount; coupon 0% ꭕ Inverse floating rate loan =>
✓ Capped variable rate loan => 10 mil, 3M 10 mil; 6% - 3M LIBOR
LIBOR +1%, max 5%

✓Some inflation-linked loans=> 10 mil. USD,
linked to US inflation
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Contractual Cash Flow Characteristics Test – Examples
Example 1: A bond's contractual terms specify payments of principal & interest on principal
linked to an inflation index. The inflation link is not levered and the principal is protected.
The bond meets the contractual cash flow characteristics test. The interest rate is reset to
"real" interest rate based on the inflation link.
Example 2: A bond’s contractual terms specify payments of principal and interest on principal
linked to an equity index.
The bond does not meet the contractual cash flow characteristics test.
Example 3: A bond's contractual terms specify payments of principal and interest on principal
that is reset for a three month term based on the current 3-month LIBOR rate.
A floating rate bond meets the contractual cash flow characteristics test.
Example 4: loan pays an inverse floating interest rate.
The loan does not meet the contractual cash flow characteristics test.
Example 5: A bond pays a floating interest rate with an interest rate cap (trần LS). The bond
contains payments of both fixed interest rates and variable interest rates.
The bond meets the contractual cash flow characteristics test.
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(2)Business Model Test
• An entity's business model refers to how it manages its financial assets

in order to generate cash flows.
– It could be generated by the entity collecting the contractual cash
flows from the asset itself, selling the financial asset or both
– Determined on portfolio basis and NOT on the individual
instrument itself or reporting entity level
– Factors to be considered include but not limited to:
• How the performance of the financial assets are reported to
key management personnel?
• How manager of the business are compensated (e.g. based on
Fair Value changes of the financial assets management)?
• What are the frequency, timing, and volume of sales in prior
periods?
• Modification of cash flows from floating rates to fixed rates via
derivatives (e.g. interest rate swaps) does not change the
business model. 25
Business Model Test – Examples

Example 1: An entity holds quoted bonds to collect their principal and interest but
would sell the investments to fund capital expenditures if the need arises.
The business model is to hold bonds to collect contractual CFs as sale is
expected to be infrequent.
Example 2: An entity holds bonds to meet its daily liquidity needs. The entity actively
manages the returns on the bonds.
The business model is to both hold bonds to collect contractual cash flows and
for sale.
Example 3: An entity buys loans, including loans that are credit-impaired. If
payments are not made, the entity contacts borrowers to collect the cash flows. The
entity also enters into interest rate swaps to convert the interest flows from fixed rate
to floating rates.The business model is to collect contractual cash flows. The
presence of an interest rate swap to modify the cash flows does not affect the
business model.
Example 4: An entity manages its loans with the objective of realizing cash flows
through sale of the loans. The decisions are made based on the fair values of the
loans, which result in active buying and selling of loans.
The business model is to hold the loans for sale.
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Classification of financial assets (IFRS 9)

No
Contractual cash flows solely Equity instrument: FVOCI
for principal and interest? option selected?
Test of CF
Yes
No
Business model: Held to Business model: Held to collect
collect contractual CF only? contractual CF and for sale?
No No
Yes Yes
Yes No Yes
FVTPL option used? FVTPL option used?
No
Yes
I. AMORTIZED COST II. FAIR VALUE through P/L III. FAIR VALUE through OCI
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Reclassifications possible!
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Classification of financial assets (IAS 39)
Classification of financial assets (IAS 39)
FA at fair value Held-to-maturity Loans and Available-for- sale

through profit or loss financial instrument receivables financial asset
= fixed / determinable = created by entity

Held for Designated payments - Supplying money / = non – derivative
trading at FVTPL = fixed maturity goods/services = designated as AFS
= intention + ability to - participating in loan
hold syndications
- Purchasing unquoted
debt instruments
II. FAIR VALUE through III. FAIR VALUE

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I. AMORTIZED COST through OCI
P/L
2. Classification of FL
Classification of financial liabilities
I. FL at fair value through profit or loss II. FL at amortized cost
Held for trading Designated at FVTPL All other liabilities

o repurchasing in near – term o reduces accounting mismatch
o Portfolio with short – term o Group managed on FV basis
profit taking o Embedded derivative
o derivative
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III. Accounting for financial assets II. Ke toan TSTC-AC - tren CS gia goc
1. Measurement:
2. Accounting for financial asset
a, Nguyen tac ke toan
3. Impairment of financial asset
- Do luong ban dau: Theo GTHL
Lai suat HD khac LS thuc (Giao dich tren TT hoat dong: Gia thi
khac Ls thi truong => Tinh tr la gia trii HL)+ CP giao dich
vao thoi diem nao do - Thu nhap lai (P/L) tinh theo lai
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suat thuc - GTDT ban dau (GTHL
+ CPGD)
- Dong tien tuong lai theo
HD
thuoc CCN (6,5 nm) 10
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LSTT: Tinh tai mot thoi diem
1.Measurement: Initial Recognition CPGD = 0 => LS thuc = LS thi

• IFRS 9 indicates three classifications of financial instruments:
truong (1/7/x4)
Classification Initial Subsequent Gain or losses
recognition measurement
FVTPL Fair value Fair value • Dividends to PL
• Interest to PL LSHD > LST => phu troi
• FV change to PL
Amortized cost Fair value +
transaction
Amortized cost
balance
• Amortized interest to PL
• Impairment loss to PL
LSHD < LST => Chiet khau
costs
FVOCI Fair value +
transaction
costs
Fair value • Dividends to PL
• Recognised in OCI for FV
changes and in P/L for
LSHD = LST => Dung menh gia
impairment losses (debt)
• FX gains or loss to OCI for
equity and to PL for debt
Compare vs.
IFRS 9 here
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- Chenh lech: Tien lai va thu nhap lai =>

Hang ky se phan bo de giam dan cho
phu troi hay chiet khau
1. Measurement:
• Financial Asset
Subsequent Measurement - B/S (BCDKT): do luong AC (giá goc va
– At either (a) amortized cost, (b) fair value through other comprehensive income or (c) fair
value through profit or loss in accordance with its classification set on initial recognition.
pha bo)
• Financial Liability
– At amortized cost except for
a) financial liabilities at fair value through profit or loss
Xet ton that TSTC; neu co ton that =>
b) financial liabilities that arise when a transfer of a financial asset does not qualify for
derecognition or when the continuing involvement approach applies. p/L
c) financial guarantee contracts.
d) commitments to provide a loan at a below-market interest rate.
e) contingent consideration recognised by an acquirer in a business combination to
which IFRS 3 applies. b, thi du: Ngay 1/7/x4: dau tu vao
• Equity
– All investments in equity instruments and contracts on those investments to be measured
at fair value
TPhieu
– Cost may be an approximate estimate of fair value in limited circumstances (e.g.
insufficient recent information, wide range of possible fair value measurements) NO TK TSTC (AC - MG) 100.000
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No TKTC (AC - phu troi): 2.700
Co TK tien 102.700
Gia su: Chiet khau
No TSTC - AC - MG
Co TSTC - AC -Ckhau
2. Accounting for financial assets
Co tien
2.1. Accounting for FA at Amortized cost => CP giao dich: 500$ => dua vao chiet
2.2. Accounting for FA at FVTPL
2.3. Accounting for FA at FVTOCI
khau hay phu troi
2.4. Reclassifications among categories No TSTC (AC - phu troi/chiet khau) -
500
Co TK - tien: 500
Ngay 31/12/X4: Tien lai/ Thu nhap lai/
phan bo phu troi:
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No TK tien: 2.250 = 100.000 x 4,5% x
1/2
Co TK - thu nhap lai: = 102.700 x
4,02% x 1/2 = 2.064
Co TK - TSTC (AC - phu troi) = 2.250 -
2.064 = 186 11
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2.1. Accounting for FA at amortized cost Dao han 31/12/X10

Amortized Cost: Definition
No TK tien : 4.500
The amount at which the financial asset is measured at initial recognition minus
the principal repayments, plus or minus the cumulative amortisation using the
Co TK TN lai : 4.039
effective interest method of any difference between that initial amount and the
maturity amount and, for financial assets, adjusted for any loss allowance
Co TK TSTC (AC-PT) 461
• Effective interest rate (EIR)
– An entity need to estimate the expected cash flows taking into consideration No TK tien 100.000
all the contractual terms of the financial instrument (e.g. prepayment terms,
extension terms, call and similar options). Co TK TSTC (AG-MG) 100.000
– The entity should NOT consider the expected credit losses
– The effective interest calculation itself includes all fees and points paid or
received between parties to the contract, transaction costs, and all other
premiums or discounts. 2. TSTC - FVPL (CC no + CCPH) +
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CCV
Co tuc Tien lai
a, nguyen tac:
- Do luong ban dau: GTHL/ chi phi giao
dich => dua vao CPKD trong ky (P/L)
Amortized Cost: Condition
• A financial asset is measured at amortized cost if:

1. The business model’s objective of holding the assets is to collect contractual
Tien lai (CCN/ CCPH) => Thu nhap lai
cash flows
2. The contractual terms of the financial assets provide only principal and
trong ky (P/L) => ghi nhan theo LSHD
interest payments on specified dates
• Prepayment is considered as payment of principal and interest if:

Co tuc nhan duoc (CCV) => Thu nhap
1. Prepayment term is not contingent on future events, e.g. term offers
protection from credit deterioration, change in control of issuer and changes
co tuc (P/L) Luu y: phan co tuc truoc
in tax laws
2. Prepayment represent unpaid amounts of principal and interest
dau tu => Tru vao Gtri TSan
- khong co phu troi, chiet khau

35
- B/S: FV; dental FV => P/L
- Khong xet ton that
Illustration 9.7- Measurement at amortized cost

Ngay 1/7/x4:
No TKTSTC (FVPL) 102.700
Co Tien
✓ Investment cost......................................................$ 102.700
✓ Principal at maturity:........................................... ......$ 100.000
✓ Premium on purchase:...................................................$ 2.700
✓
✓
Coupon rate:...................................................4,5%
Cash interest income per annum:...................................$ 4.500
Luu y: Chi phi giao dich (Neu co)
✓
✓
Years to maturity from inception:..................6,5 years
Effective interest rate:.......................................4,02%
No TK Cphi (P/L) 500$
✓
✓
Cash interest income for half – year 20X4:......................$ 2.250
Fair value at 31 Dec 20X4:............................................$ 104.000
Co TK tien
31/12/X4
- Tien lai nhan duoc:
36
No TK tien: 2.250$
Co TK TN lai: 2.250$
- B/S: FV (31/X4) 104.000
==> Lai suat thi truong? 3,74%
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=> dental FV = 104.000 -102.700
= 1.300$
2.1. Accounting for FA at amortized cost

No TK TSTC (FVPL 1.300
Journal entries for measurement at amortized cost Co TK lai /lo
Dr Investment in debt security ……. XX,XXX
Thi dutr 30: CC von
Dr
Cr
Unamortized premium………….
Cash ……………………………….
XX,XXX
XX,XXX
1/7/x4:
Purchase of investment No TK TSTC (FVPL)
Dr
Cr
Cash ………………………………..
Interest income …………………….
XX,XXX
XX,XXX
CO TK tien 28.000
Recognition of interest income
Dr Interest income/amortized premium XX,XXX 31/12/X4: co tuc nhan duoc: 2.000

Cr Unamortized premium ………….
Amortization of premium for first half-year
XX,XXX
No TK tien/ Co TK TN co tuc
37
=> Don gia FV = 35.000
No TK TSTC (FVPL)
Co TK lai lo 7.000
Illustration 9.7- Measurement at amortized cost

31/03/X5: ban
Date
Cash interest
4.50%
Effective interest
4.02%
Amortized
premium
Unamortized
premium
Principal
premium
Ending gross carrying
amount No TK tien: 33.000
(1)
1/7/X4
31/12/X4
(2)=(6)*4,5%
2,250
(3)=(7)*4,02%
2,064
(4)=(2)-(3)
186
(5)
2,700
2,514
(6)
100,000
100,000
(7)=(5)+(6)
102,700
102,514
No TK lai/Lo (P/L) 2.000
31/12/X5
31/12/X6
31/12/X7
4,500
4,500
4,500
4,121
4,106
4,090
379
394
410
2,135
1,741
1,331
100,000
100,000
100,000
102,135
101,741
101,331
Co TK TSTC( (FVPL): 35.000
31/12/X8 4,500 4,074 426 905 100,000 100,905
31/12/X9 4,500 4,056 444 461 100,000 100,461
31/12/X10 4,500 4,039 461 (0) 100,000 100,000
TSTC - FV OCI
Total 29,250 26,550 2,700
1 July 20X4: Dr- Investment in debt security (AC):.......100.000

Dr- Unamortized premium:..................2.700
Cr- Cash:..............................................102.700
Nguyen tac:
31 Dec 20X4: Dr- Cash:...........2.250
Cr- Interest income:2.250
- Ban dau: GTHL + CPGD (= AC)
Dr- Interest Income (amortized primium): 186
- Thu nhap lai (CCN) P/L (AC)
Cr-Unamortized premium: ............................186 38
- Co tuc nhan duoc (CCV): P/L(tru co
tuc truoc dau tu)
- B/S: FV; dental FV => OCI (B/S:
VCSH)
Examples (*) - Khi ban TSTC; so du luy ke OCI xu ly:
Amortised Cost – Amortisation of Premium – Bond => CC no: OCI => P/L
• Anna buys a 5-year listed bond for 106.600, paying a premium of
=> CC von: khong chuyen OCI => P/L
6.600 as it has a face value of 100.000. - Xet ton that voi cong cu no, neu co TT
• The bond pays 6% interest at the end of each year. Anna paid the
premium as 6% is an attractive rate of interest compared to other => P/L
similar investments.
• Anna will hold the bond to maturity. She will amortise the
=> Khong xet ton that voi CC von
premium over the life of the bond. Her effective interest rate is b, TD cong cu no 9.9
4,5% after adjusting for the premium.
1/7/X4: DTu (GTHL + CPGD)
No TK TSTC (FVOCI) 102.700
Co Tien
39
31/12/X4: FV: 104.500
31/12/X4: Thu nhap lai/ Tien lai CA: 102.514 => dental = 1.486
No TK Tien : 2.250
Co TK TN lai: 2.064 (LST) No TK TSTC (FVOCI) 1.486
CP TK TSTC (FVOCI) 186 CO TK OCI
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Examples (*)
Amortised Cost – Amortisation of Premium – Bond
Effective
Opening Cash Amortisation Effective Closing Interest
Year Value Interest of premium Interest Value Rate
1 106600 6000 -1203 4797 105397 4,5%
2 105397 6000 -1257 4743 104140 4,5%
3 104140 6000 -1314 4686 102826 4,5% b-2, Thi du - CCvon
4 102826 6000 -1373 4627 101453 4,5%
5 101453 6000 -1454 4546 100000 4,5% 1/7/X4:
No TK TSTC (FVOCI) 28.000
Co Tien
40
31/12/X4: Co tuc
No TK Tien 2.000
Co TK TN co tuc
31/12/x4: - CA: 28.000
- FV: 35.000
Examples (**)
Financial liability - Amortisation of Discount – Amortised Cost
NO TK TSTCL (FVOCI) 7.000
Co TK OCI
• Katya’s bank issues a 5-year bond that will pay interest of 6% 31/3/20X5: Ban 33.000
at the end of each year.
• On the date of issue, interest rates for similar instruments rise No TK OCI
and she issues the bond at a discount of 6.600. This lifts the
effective interest rate to 7,64%. Katya will amortise the
Co TK TSTC- FVOCI 2.000
premium over the life of the bond using the effective interest
rate of 7,64%.
NO TK Tien 33.000
Co TK TSTC - FVOCI
41
Examples (**)
Financial liability - Amortisation of Discount – Amortised Cost
Effective
Opening Cash Amortisation Effective Closing Interest
Year Value Interest of discount Interest Value Rate
1 93400 6000 1133 7133 94533 7,64%
2 94533 6000 1220 7220 95753 7,64%
3 95753 6000 1313 7313 97066 7,64%
4 97066 6000 1413 7413 98479 7,64%
5 98479 6000 1521 7521 100000 7,64%
42
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• A financial asset is measured at FVTPL if
1. Not measured at amortized cost; and
2. Not measured at FVOCI
• Two sub-categories of FVTPL:

1. Financial instruments that are “held for trading:” A financial asset or a financial
liability is considered to be held for trading if there is an intention of selling or
repurchasing it in the near term, or if it is an item within a portfolio for which there is
evidence of a recent pattern of short-term profit-taking; and
2. Any financial asset or financial liability designated as an item in this category at initial
recognition. The designation is also referred to as the application of the “fair value
option:”
43
• Journal entries for measurement at FVTPL (debt security)

Dr Investment in debt equity (FVPL) XX,XXX
Cr Cash ……………………………. XX,XXX
Purchase of investment
Dr Cash ………………………. ……. XX,XXX

Cr Interest income ……………….. XX,XXX
Cr Investment in debt security(FVPL) XX,XXX
Year-
Recognition of interest income using effective interest method end
entries
Dr Investment in debt equity (FVPL) XX,XXX
Cr Gain in fair value ………………….. XX,XXX
Recognition of increase in FV
44
Illustration 9-11a- FA as FVTPL – Debt security
Refer to details in Illustration 9-7

✓ Investment cost......................................................$ 102.700
✓ Coupon rate:...................................................4,5%
✓ Cash interest income per annum:...................................$ 4.500 Investment in debt
✓ Years to maturity from inception:..................6,5 years security (FVTPL)
✓ Effective interest rate:.......................................4,02%
✓ Cash interest income for half – year 20X4:......................$ 2.250 102.700 186
✓ Fair value at 31 Dec 20X4:............................................$ 104.000 1.486
B: 104.000
1 July 20X4: Dr- Investment in debt security (FVTPL):.......102.700
Cr- Cash:..............................................102.700 P/L: 3.550
Dr- Cash:...........2.250 - Gain: 1.486
- Income: 2.064
Cr- Inves. In debt sec: 186
Dr- Investment in debt security: 1.486 (=104.000-((102.700-186))

Cr-Gain/loss (P/L):... ..................1.486
45
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Illustration 9-11a- FA as FVTPL – Debt security

✓ Investment cost......................................................$ 102.700
✓ Principal at maturity:........................................... ......$ 100.000 Investment in debt
security (FVTPL)
✓ Coupon rate:...................................................4,5% 102.700
✓ Cash interest income per annum:...................................$ 4.500
1.300
✓ Years to maturity from inception:..................6,5 years
B: 104.000
✓ Cash interest income for half – year 20X4:......................$ 2.250 P/L: 3.550
✓ Fair value at 31 Dec 20X4:............................................$ 104.000 - Gain: 1.300
- Income: 2.250
1 July 20X4: Dr- Investment in debt security (FVTPL):.......102.700
Cr- Cash:..............................................102.700
31 Dec 20X4: Dr- Cash:...........2.250
Dr- Investment in debt security: 1.300

Cr-Gain/loss (P/L):1.300
46
• Journal entries for measurement at FVTPL (equity security)
Dr Investment in equity security (FVPL) XX,XXX

Cr Cash ……………………………. XX,XXX
Purchase of equity security
Dr Investment in equity security … XX,XXX

Cr Gain/Loss in fair value ………… XX,XXX
Recognition of increase in fair value to profit/loss
47
• Journal entries for measurement at FVTPL (equity security)

[continued]
Dr Gain/loss in FV ….……….……. XX,XXX
Cr Investment in equity security (FVPL) XX,XXX
Recognition of decrease in fair value to profit/loss
Dr Cash ……………..….………. XX,XXX

Cr Investment in equity security(FVPL) XX,XXX
Sale of equity security
48
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Illustration 9-11b- FA as FVTPL – Equity security
Vào ngày 1/7/20X4, Cty Omega mua 10.000 cổ phiếu (shares) của cty Delta với
giá 2,8$/CP. Omega phân loại CP này vào nhóm FA – FVTPL. Vào cuối năm tài
chính (31/12/X4), giá cổ phiếu của Delta là 3,5$/CP. Ngày 31/3/X5, Omega bán
toàn bộ cổ phiếu của Delta với giá 3,3$/CP.
Ngày 1/7/X4:
Dr- Investment in equity security(FVTPL): 28.000 ($)
Cr – Cash : 28.000 ($)
Ngày 31/12/X4:
Dr- Investment in equity security(FVTPL): (3,5-2,8)* 10.000 = 7.000 ($)
Cr – Gain/Loss (P/L): 7.000 ($)
Ngày 31/3/X5:
Dr- Cash: 10.000 * 3,3 = 33.000 $
Dr – Gain/loss (P/L): 2.000 $
Cr- Investment in equity security (FVTPL): 35.000 $
49

• A financial asset (debt security) is measured at FVOCI if:
1. The business model’s objective of holding the assets is to collect contractual cash flows
and for sale
2. The contractual terms of the financial assets give payments of only principal and interest
on specified dates
• FVOCI aims to provide amortized cost information in P/L and FV carrying amount in the
statement of financial position
Type Recognition
Interest income Profit and loss based on effective interest method
Cumulative gain or loss in OCI recycled from equity to
Derecognition of financial asset
P/L
Recognised in OCI for FV changes and in P/L for
FV changes
impairment losses
FX differences OCI with other FV changes
50
• Relevant Journal entries for measurement at FVOCI (debt

security)
Dr Investment in debt security (FVOCI) XX,XXX
Cr Cash ………………………………. XX,XXX
Purchase of investment
Dr Cash ………………………………. XX,XXX

Cr Interest income ……….…………. XX,XXX
Cr Investment in debt security(FVOCI) XX,XXX
Recognition of interest income using effective interest method
Dr Investment in debt security(FVOCI) XX,XXX

Cr Equity ……………………(OCI) XX,XXX
Fair value adjustment to equity (deferred gains)
51
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Illustration 9.9- Measurement at FVTOCI

✓ Investment cost......................................................$ 102.700
✓ Coupon rate:...................................................4,5%
✓ Cash interest income per annum:...................................$ 4.500
✓ Years to maturity from inception:..................6,5 years
✓ Cash interest income for half – year 20X4:......................$ 2.250
✓ Fair value at 31 Dec 20X4:............................................$ 104.000
1 July 20X4: Dr- Investment in debt security (FVOCI):.......102.700

Cr- Cash:..............................................102.700
31 Dec 20X4: Dr- Cash:.......................2.250
Cr- Interest income:...................2.064
Cr- Investement in debt security (FVOCI): 186
Dr- Investment in debt security (FVOCI): 1.486 (=104.000-(102.700- 186))

Cr-OCI ..................... ............................................. 1.486
52
FVOCI Equity Securities

• Equity securities that are not held for trading and not contingent
consideration recognized by the acquirer in a business combination for
which IFRS 3 applies can be measured at FVOCI if elected.
– Cumulative gain or loss in OCI CANNOT be recycled to P/L for FVOCI
equity securities. However, the entity may transfer the cumulative gains or
losses within equity.
– Foreign exchange differences arising from the equity instrument is presented in
OCI as equity instruments are not monetary items.
– Dividend income on such investments are recognized in profit or loss
unless it represents a recovery of part of the cost of investment.
– No requirement to test FVOCI equity securities for impairment
53
• Relevant journal entries for FVOCI equity securities

Dr FVOCI Investment ………………. XX,XXX
Cr Cash ………………………………. XX,XXX
Purchase of FVOCI investment
Dr FVOCI Investment ……………. XX,XXX

Cr Equity ……………………..……. XX,XXX
Fair value adjustment to equity (deferred gain)
Dr Cash ………………………….……. XX,XXX

Cr FVOCI Investment ……………. XX,XXX
Sale of FVOCI investment
54
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FVOCI Equity Securities: Example

• On 1 June 20x4, Omega Company purchased 10,000 units of shares in Delta
Technology at $2.80 per share. Omega classified the investment as FVOCI. The
price of Delta Technology shares rose to $3.50 per share on 31 December 20x4,
the financial year-end of Omega. On 31 March 20x5, Omega sold all its shares in
Delta Technology at $3.30 per share.
55
2.4. Reclassification among categories

Reclassifications: Amortized Cost to FVTPL
• Reclassifications between categories (amortized cost, FVOCI or FVTPL) are
prospective
• From amortized cost into FVTPL

– The difference in FV and carrying amount on the reclassification date is
recognized as profit or loss.
• Journal entries for reclassification from amortized cost into FVTPL
Dr Investment in debt security(FVPL) XX,XXX
Cr Investment in debt security(AC) xxxxxx
Cr Gain in fair value ………….….. XX,XXX
Recognition of difference between FV and carrying amount to profit/loss on
reclassification date
56

Reclassifications: FVTPL to Amortized Cost
• From FVTPL into amortized cost

– The FV at reclassification date is the new carrying amount
– Effective interest rate is recalculated based on the fair value at the date
of reclassification.
• Journal entries for reclassification from FVTPL into amortized cost
Dr Unamortized premium …. XX,XXX

Dr Investment in debt security(AC) xxxxxx
Cr Investment in debt security(FVPL) XX,XXX
Reclassification of investment in debt security to unamortized premium to reflect
the FV as the new carrying amount
57
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Reclassifications: Amortized Cost to FVOCI
• From amortized cost into FVOCI:

– The difference in FV and carrying amount on the reclassification date is
recognized in other comprehensive income.
• Journal entries for reclassification from amortized cost to FVOCI

• Journal entries are similar to reclassification from amortized costs to
FVTPL
• Except that the gains in FV are recognized in OCI instead of profit or loss
Dr Investment in debt security(FVOCI) XX,XXX

Cr Investment in debt security(AC) xxxxxx
Cr OCI………….….. XX,XXX
Recognition of difference between FV and carrying amount to OCI on
reclassification date
58

Reclassifications: FVTOCI to Amortized Cost
• From FVOCI into amortized cost:

– Cumulative gain or loss in OCI is adjusted against the FV at reclassification
date. Effective interest rate is not adjusted
• Journal entries for reclassification from FVOCI into amortized cost
Dr Fair value reserve (OCI) XX,XXX
Cr Investment in debt security (FVOCI) XX,XXX
Adjust cumulative gain/loss in OCI to investment in debt security
Dr Unamortized premium XX,XXX

Dr Investment in debt security (AC) xxxxxx
Cr Investment in debt security (FVOCI) XX,XXX
Reclassification of investment in debt security to unamortized premium to
reflect the fair value as the new carrying amount
59

Reclassifications: FVOCI to FVPL
• From FVOCI to FVTPL:

– Fair value at reclassification date becomes new carrying amount.
Cumulative gain or loss previously in OCI is reclassified from equity
to profit or loss as a reclassification adjustment on reclassification date
• Journal entries for reclassification from FVOCI into FVTPL
Dr Fair value reserves (OCI) XX,XXX
Cr Gain/loss in fair value XX,XXX
Adjust cumulative gain/loss in OCI to P/L as a reclassification adjustment
Dr Financial asset (FVPL) XX,XXX
Cr Financial asset (FV OCI) XX,XXX
• From FVTPL to FVOCI

− Fair value at reclassification date is the new carrying amount
60
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3. Impairment of financial asset
Credit loss All contractual CF due in line with the contract (PV)
All CF expected to receive discounted at

At initial recognition: OK At initial recognition impaired
Original effective interest rate Credit – adjusted effective interest rate
(for purchased or originated credit – impaired FA)
Expected
Weighted average of credit losses with resp. risk of default as weights
credit loss
< 90 days overdue => No default
e.g probability of default
61
Impairment (IFRS 9)
General approach Simplified approach

3 stages of AF No stages (lots of assessment not necessary)
Loss allowance Loss allowance = life – time ECL
12-month ECL Life – time ECL ✓ Trade receivables

✓ All financial assets subject ✓ Contract assets (IFRS 15)
to impairment • Do not contain significant financing component
• Contain significant financing component, but
Except for: chosen to measure loss allowance at lifetime ECL
Trade receivables or ✓ Lease receivables (IAS 17)
contract assets (IFRS 15)
without significant financing • if chosen to measure loss allowance at lifetime
component ECL
62
Measurement of Expected Credit Losses
Simplified Approach
• Trade Receivables
– An entity should measure the loss allowance equal to lifetime expected credit
losses for trade receivables or contract assets (one year or less) that result from
transactions that are within the scope of IFRS 15, and that do not contain a
significant financing component.
– For trade receivables or contract assets that contain a significant financing
component, the entity can choose to either measure the loss allowance at an
amount equal to 12-month expected credit losses or lifetime expected credit
losses
• Leases
– When measuring a loss allowance, the cash flows and same discount rate used
for determining the expected credit losses should be consistent with those used
in measuring the lease receivable in accordance with IFRS 16
– An entity may select its accounting policy for trade receivables, lease receivables
and contract assets independently of each other
63
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Illustration 9.16
• In Illustration 9-7: As at 31/Dec/X4, the entity calculates the loss allowance
based on 12-month expected credit loss as there were no significant increases in
expected credit losses since the initial recognition on 1 July X4.
Amortized Unamortized Principal Ending gross carrying
Cash interest Effective interest premium premium premium amount
Date 4.50% 4.02%
(1) (2)=(6)*4,5% (3)=(7)*4,02% (4)=(2)-(3) (5) (6) (7)=(5)+(6)
1/7/X4 2,700 100,000 102,700
31/12/X4 2,250 2,064 186 2,514 100,000 102,514
31/12/X5 4,500 4,121 379 2,135 100,000 102,135
...
31/12/X9 4,500 4,056 444 461 100,000 100,461
31/12/X10 4,500 4,039 461 (0) 100,000 100,000
Total 29,250 26,550 2,700
31 Dec X4: Dr Impairment loss (P/L): 2.000

Cr- Loss allowance for bond: 2.000
31 Dec X4: Gross carrying value:...............................102,514
Less: Loss allowance:.................................(2.000)
Amortized cost as 31 dec X4:......................................100.514
64
IV. Accounting for debt & equity
1. Debt vs equity
2. Accounting for equity transactions
3. Accounting for financial liabilities
4. Accounting for compound financial instruments (issue)
65
1. Debt & equity
1.1. Condition for Recognition as Equity the Perspective of an Issuer

1.2 Classification of liability & equity instruments
1.3. Contingency settlement provisions
66
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1.1. Condition for Recognition as Equity the Perspective

of an Issuer
• Classification of instruments with both debt and equity element
– Ensure proper treatment of income or expense
– Facilitate assessment of risk by users of financial statement
Classification as equity
instrument (IAS 32:16)
(a) Instruments include no (b) Instrument settled in issuer’s

contractual obligation to own equity instruments
Deliver cash or Exchange financial Non-derivative Derivative instrument that

another financial assets or liabilities that include no will be settled by
asset to another with another entity contractual obligation exchanging a fixed
entity under potentially to deliver a variable amount of cash or FA for
unfavorable conditions number of own equity a fixed number of its own
instrument equity instrument
67
Condition for Recognition as Equity: Examples
Case A: Company X issues 1,000 units of mandatorily redeemable preference shares

(MRPS) with fixed redemption period for these shares. Holders can also opt to redeem the
shares at any time for a fixed amount of cash. This instrument is:
Answer: Issuer has no right to avoid delivering cash to settle its contractual obligation.
MRPS fails condition (a) above and is classified as a financial liability. Dividend on
MRPS is recognized as interest expense -> IAS 33- EPS
Case B: Company Y enters into a contract to purchase oil by issuing a variable amount of
its own shares that is equivalent to the market value of 1 million barrels of oil
Answer: Contract is non-derivative. Amount of obligation to be settled depends on price of

oil at settlement date. Obligation is settled by issuing a variable number of its own shares
indicates a financial liability. [Condition (b) above is not met]
68
Condition for Recognition as Equity: Examples
Case C: Company Z issues 100 warrants to Company S. Company Z will

have to issue 100 units of its own shares to Company S if the latter exercises
the warrants
Answer: Warrants are derivative instruments that are settled by Company Z

issuing a fixed quantity of its own shares in exchange for a fixed amount of
cash. For determining whether there is a contractual obligation to deliver cash
or another financial asset, it should be noted that an entity's own equity
instruments does not meet the definition of financial asset. The warrants meet
the conditions to be classified as an equity instrument.
W: chứng quyền : quyền mua CP của DN với mức giá xác định: DN phát hành
Right: quyền mua CP (ưu tiên cho CĐ hiện hữu) với mức giá xác định- DN PH
Call option: Quyền chọn (quyền mua CP của DN với mức giá xác định): TT
69
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1.2. Classification of liability and equity instruments
IFRS 2-
70
1.3. Contingency Settlement Provision
• IAS 32:25 provides guidelines that a financial instrument is a financial

liability if the financial instrument contains contingency settlement
provisions
– Unavoidable obligation on part of issuer to deliver cash or financial asset
upon the occurrence or non-occurrence of certain future events (e.g.
revenue, net earnings, or a specified financial ratio) beyond the control of
issuer and holder of instrument
Except when:
a) The part of the contingent settlement provision that could require settlement
in cash or another financial asset is not genuine;
b) The issuer can be required to settle the obligation in cash or another financial
asset only in the event of liquidation of the issuer; OR
c) The instrument has all the features of a puttable instrument and meets the
conditions in para 16A and 16B of IAS 32
Then the financial instrument will be classified as equity.
71
1.3. Contingent settlement provisions
Contingent settlement provisions
Settlement depends on
Uncertain future events Outcome of uncertain circumstances
Fixed amount of shares => EQUITY

Preference shares redeemable at OR
Cash if shares <XY => LIABILITY
LIABILITY
72
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1.3. Contingent settlement provisions
Settlement options: derivatives
Issue OR holder can CHOOSE to settle in
Cash Share or other instruments
LIABILITY OR ASSET
If all options result in equity instrument => EQUITY
73
2. Transactions in own equity
2.1. Transactions in own equity

2.2. Treasury shares
3.3. Interest, dividends, gains and losses
74
2.1. Transactions in own equity

liability
Transactions in own equity
EQUITY RESIDUAL
Settled by the entity receiving or Exchanging a fixed number of its

delivering a fixed number of its own own shares for a fixed amount of
shares for no future consideration cash or other financial assets
LIABILITY LIABILITY EQUITY

# own shares own shares for 100 own shares
Writen option $100K Warrants
Any consideration paid/received Deducted / added directly to equity

Changes in FV Not recognized
75
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Transactions in own equity- example -1

During the year 20Z4, Raiser issued 100 000 warrants at 6 cents each. The warrant
gives its holders the right to purchase 1 ordinary share of Raiser for 1 EUR, but the
warrant expires on 31 December 20Z5. At the time of issue, the market value of
Raiser's shares was 1.10 EUR per share.
By 31 December 20Z5, warrant holders exercised 75 000 warrants.
How should these transactions be recognized in the financial statements of Raiser at
the time of issue and as of 31 December 20Z5?
Note: 1 share has a nominal value of 70 cents.
1. Initial recognition of warrant

Classification of warrant: own shares + fixed amount => equity instrument
Warrant premium: 0.06

N. of warrants: 100,000
Total consideration received: 6,000
Debit Cash: 6,000

Credit Equity – warrants: 6,000
76
Transactions in own equity- example -1
2. 31 December 20Z5
Cash received: 75,000
Number of shares: Warrants exercised: 4,500
Total issue of share capital 79,500
Nominal value per share: 0.70
Issued share capital: 52,500
Issued share premium: 27,000
Debit Cash: 75,000

Debit Equity - warrants: 4,500
Credit Equity - Share capital: 52,500
Credit Equity - Share premium: 27,000
77
2.2. Treasury shares
Treasury
= own shares of an entity
ASSET = own shares of an entity
Purchase of own shares:

Debit – Equity- SC
Credit: Cash/Payable
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2.3.Interest, dividends, gain and loss
LIABILITY EQUITY
Profit or loss Equity

Example: - Dividends payable on mandatorily - Dividends payable on
redeemable preference shares ordinary shares
Dividends – preference shares:

Debit: Financial expenses
Credit: Cash/payable
Dividends – ordinary shares

Debit: Equity
Credit: cash/payable 79
3. Accounting financial liability
Example 2
On 1 January 20X1, Raiser plc. took a loan from BeeBank (at market conditions)
amounting to 50 mil. with the interest of 7% p.a. to be paid in arrears on 31
December each year. Final maturity of the loan is on 31 December 20X7 and Raiser
paid the fee of 500 000 covering the bank's costs for assessment of Raiser's financial
situation, opening the loan facility and drafting the loan contract.
During 20X5, Raiser suffers financial difficulties and the bank agrees to modify the
existing loan. On 1 January 20X6, new terms are agreed as follows:
- Raiser will not pay any interest for the years 20X6 and 20X7
-from 20X8, Raiser will pay the interest of 8.5%
-the final maturity date is postponed to 31 December 20X10
- Raiser needs to pay the fee of 400 000 related to the modification of the loan
contract.
How should this transaction appear in the financial statements of Raiser?
80
Example 2: Solution
1. Original effective interest rate
Year Cash flow Liability b/f Interest Cash paid Liability c/f
1-Jan-
20X1 0 49,500,000 49,500,000
20X1 1 -3,500,000 49,500,000 3,557,448 -3,500,000 49,557,448
20X2 2 -3,500,000 49,557,448 3,561,576 -3,500,000 49,619,024
20X3 3 -3,500,000 49,619,024 3,566,002 -3,500,000 49,685,026
20X4 4 -3,500,000 49,685,026 3,570,745 -3,500,000 49,755,771
20X5 5 -3,500,000 49,755,771 3,575,829 -3,500,000 49,831,600
20X6 6 -3,500,000 49,831,600 3,581,279 -3,500,000 49,912,880
20X7 7 -53,500,000 49,912,880 3,587,120 -53,500,000 0
7.19%
Effective interest rate

Formula used:
=IRR(C16:C23)
81
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Example 2: Solution
2. PV of CF under new terms

Year Cash flow Discount factor Present value
1-Jan-
20X6 0 -400,000 1.000 -400,000
20X6 1 0 0.933 0
20X7 2 0 0.870 0
20X8 3 -4,250,000 0.812 -3,451,163
20X9 4 -4,250,000 0.758 -3,219,766
20X10 5 -54,250,000 0.707 -38,343,695
-45,414,624
Discount factor
Formula used:
=1/(1+7.19%)^year
82
3. Comparison as of 1 January 20X6
PV of original financial liability: 49,831,600 No accounting for

PV of new financial liability: 45,414,624 extinguishment; instead,
Difference 4,416,977 adjust effective interest
Difference in %: 8.86% rate accounting
4. Loan under new terms
1-Jan-
20X6 0 49,431,600 49,431,600
20X6 1 0 49,431,600 2,524,725 0 51,956,326
20X7 2 0 51,956,326 2,653,676 0 54,610,002
20X8 3 -4,250,000 54,610,002 2,789,213 -4,250,000 53,149,215
20X9 4 -4,250,000 53,149,215 2,714,603 -4,250,000 51,613,818
20X10 5 -54,250,000 51,613,818 2,636,182 -54,250,000 0
5.11%
5. Journal entries Debit Liability – loan (CK): 400.000
On 1 January 20X6: Credit Cash: 400.000
Fee paid for modification of the loan contract:
On 31 December 20X6:
Interest on loan: Debit P/L-Interest expenses: 2,524,725 83
Credit Liability – loan (CK): 2,524,725
Example 3:
The same example as before - however, the new terms are agreed on 1 January
20X6 as follows:
- Raiser will not pay any interest for the years 20X6 and 20X7
-from 20X8, Raiser will pay the interest of 13%
-the final maturity date is postponed to 31 December 20X13
- Raiser needs to pay the fee of 400 000 related to the modification of the loan
contract.
Fair value of the new loan based on the similar loans is 50 500 000.
How should this transaction appear in the financial statements of Raiser?
84
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Example 3: Solution
1. Original effective interest rate
1-Jan-
20X1 0 49,500,000 49,500,000
20X1 1 -3,500,000 49,500,000 3,557,448 -3,500,000 49,557,448
20X2 2 -3,500,000 49,557,448 3,561,576 -3,500,000 49,619,024
20X3 3 -3,500,000 49,619,024 3,566,002 -3,500,000 49,685,026
20X4 4 -3,500,000 49,685,026 3,570,745 -3,500,000 49,755,771
20X5 5 -3,500,000 49,755,771 3,575,829 -3,500,000 49,831,600
20X6 6 -3,500,000 49,831,600 3,581,279 -3,500,000 49,912,880
20X7 7 -53,500,000 49,912,880 3,587,120 -53,500,000 0
7.19%
Effective interest rate

Formula used:
=IRR(C13:C20) 85
Example 3: Solution
2. PV of CF under new terms
Year Cash flow Discount factor Present value

1-Jan-
20X6 0 -400,000 1.000 -400,000
20X6 1 0 0.933 0
20X7 2 0 0.870 0
20X8 3 -6,500,000 0.812 -5,278,249
20X9 4 -6,500,000 0.758 -4,924,348
20X10 5 -6,500,000 0.707 -4,594,175
20X11 6 -6,500,000 0.659 -4,286,141
20X12 7 -6,500,000 0.615 -3,998,759
20X13 8 -56,500,000 0.574 -32,427,928
-55,909,600
Discount factor
Formula used:
=1/(1+7.19%)^year 86
Example 3: Solution
3. Comparison as of 1 January 20X6
PV of original financial liability: 49,831,600

PV of new financial liability: 55,909,600
Difference: 6,078,000
Difference in %: 12.20%
Accounting for
extinguishment
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Example 3: Solution
4. Loan under new terms

20X5 0 50,500,000 50,500,000
20X6 1 0 50,500,000 4,402,126 0 54,902,126
20X7 2 0 54,902,126 4,785,863 0 59,687,988

20X8 3 -6,500,000 59,687,988 5,203,050 -6,500,000 58,391,038
20X9 4 -6,500,000 58,391,038 5,089,994 -6,500,000 56,981,032
20X10 5 -6,500,000 56,981,032 4,967,083 -6,500,000 55,448,115
20X11 6 -6,500,000 55,448,115 4,833,457 -6,500,000 53,781,572
20X12 7 -6,500,000 53,781,572 4,688,183 -6,500,000 51,969,755
20X13 8 -56,500,000 51,969,755 4,530,245 -56,500,000 0
8.72%
88
Example 3: Solution
5. Journal entries
On 1 January 20X6:
Debit Liability - original loan : 49,831,600
Credit Liability - new loan: 50,500,000
Credit Cash (transaction costs): 400.000
Debit P/L Loss on extinguishment of debt: 1.068.400
On 31 December 20X6:
Interest on loan:
Debit P/L-Interest expenses: 4,402,126

Credit Liability - loan: 4,402,126
89
V. Accounting for compound instrument
1. Compound instruments
2. Accounting from Holder’s Perspective: FA-> FVPL
3. Accounting from the Issuer’s Perspective
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1. Compound Financial Instruments
Definition of compound financial instruments

Instruments that have both debt
Non-derivative host instrument and
(host) or equity (embedded
embedded derivative
derivative) instruments
Accounting standards
IAS 32: Accounting from the issuer’s IFRS 9: Accounting from the
perspective investor’s perspective
Example of convertible bond (option to convert it into ordinary shares)

Issuer’s perspective
Investor’s perspective
Lower coupon rate leads to lower
Investor willing to accept lower
cash outflow and potential dilution in
coupon rate in return for right to
EPS should holders exercise
exercise the equity option
conversion right
91
2. Accounting from Holder’s Perspective
• Under IFRS 9, compound financial assets are not bifurcated

– The entire instrument is classified on basis of their business model and
contractual cash flow characteristics
– Generally, the embedded derivative with its host instrument is likely to
contain cash flows that are NOT solely payments of principal and interest and
it will fail the contractual cash flow characteristic test. Therefore, the hybrid
instrument would NOT qualify for amortized cost measurement and
would be FVTPL
• Rationale for not “bifurcating”:

– There could be two financial assets with similar characteristics but accounted
for differently due to bifurcating
92
• IAS 32:28 requires an issuer to evaluate the terms of a non-

derivative financial instrument to determine if it contains both a
liability and an equity component
– If so, the components should be classified separately (i.e. the financial
liability and its equity element are bifurcated)
– On initial recognition, the issuer re-measure the FV of the liability first, the
equity component is the residual (total proceeds – FV of the liability)
93
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Compound financial instruments
= non-derivative financial instrument with both LIABILITY and Equity element
Conventional loan Call option to shares

Example: convertible bond
1. Set FV of the whole instrument

2. Calculate the FV of the liability
Classify + present separately component
3. FV of equity = 1-2
At the issuance + not revised!
94
Illustration 1: Initial Recognition of Debt and Equity
Scenario
• Convertible bond issued at par on 1 Jan 20x0, 100.000.000
• Nominal value of $100,000.000
• Repayable at 31 December 20x3
• Annual coupon at 4% per annum, 6%/Y (>4%)
• Interest payments were paid at the end of each half-yearly
period (2% per half-year)
• Convertible at $1 of bond to 0.75 ordinary shares
100.000.000 *0,75 -> 75.000.000 OS
95
95
Illustration 1: Incremental Method of Allocation between Debt

and Equity Components
Debt Component
PV of interest payment (2,000,000 x PVIFA3%,8) ……. $14,039,380

PV of principal at maturity (100,000,000 x PVF3%,8) .. 78,941,000
PV of debt component …….……………………………. $92,980,380
Note:
1. Discount rate based on effective market interest rate of 3%
2. PVIFA3%,8 is PV of ordinary annuity at 3% for 8 (semi-annual) periods
3. PVF3%,8 is the PV of $1 at the end of period 8 at 3% discount
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Equity Component
Value of equity = $100,000,000 – Value of debt component
= $100,000,000 – $92,980,380
= $7,019,620
Note:
Both equity value and bond discount are the difference between nominal
amounts and PV of debt.
97
Illustration 1: Incremental Method of Allocation between

Debt and Equity Components
Journal entry at date of issue

Dr Cash 100,000,000
Dr Unamortized discount on bond (SFP) 7,019,620
Cr 4% Bond payable (SFP) 100,000,000
Cr Capital reserve – Equity option (SFP) 7,019,620
Record debt and equity components of convertible bond at date of issue
98

Interest expense
• Should reflect the effective borrowing cost of the bond after taking into
account the issuer’s risk characteristics
• Effective interest rate = market interest rate at time of issue
• Coupon interest payment is < than market rate and does not reflect true cost of
capital
• Interest expense will be understated; and net earnings will be overstated, if it
is recorded based on coupon rate
• Implicit exchange of equity rights for a lower coupon rate
• Reduction in interest rate is not a “free lunch”
– Income statement should reflect the economic cost of borrowing
– Effective interest expense:
➢ Coupon interest expense + amortization of discount on the bond
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Measurement of Interest Expense
• The interest expense should reflect the effective borrowing

cost of the bond after taking into account the issuer’s risk
characteristics
– Effective I/R = market I/R at the time of issue of the bond
– The effective I/R is higher than the coupon rate. There is an implicit
exchange of equity rights for a lower coupon rate
Effective interest expense =

Coupon interest expense + Amortization of discount on the bond
100
100
Illustration 1: Amortization Schedule of Bond Discount

Eq: 7,019,620
Date Cash Effective Amortized Unamortized Carrying

interest interest discount discount amount
1 Jan 20x0 $7,019,620 $92,980.380
30 Jun 20x0 $2,000,000 $2,789,411 $789,411 6,230,209 93,769,791
31 Dec 20x0 2,000,000 2,813,094 813,094 5,417,115 94,582,885
30 June 20x1 2,000,000 2,837,487 837,487 4,579,628 95,420,372
31 Dec 20x1 2,000,000 2,862,611 862,611 3,717,017 96,282,983
30 June 20x2 2,000,000 2,888,489 888,489 2,828,528 97,171,472
31 Dec 20x2 2,000,000 2,915,144 915,144 1,913,384 98,086,616
30 June 20x3 2,000,000 2,942,598 942,598 970,786 99,029,214
31 Dec 20x3 2,000,000 2,970,786 970,786* 0 100,000,000
Total $16,000,000 $23,019,620 $7,019,620
GTGS của TPCĐ ngày 31/12/X1: 96,282,983 (L)+ 7,019,620(Eq) 101
Journal Entries Pertaining to Amortization of Bond
Dr Amortization of discount (I/S) ……….. XX,XXX

Cr Unamortized discount (B/S) ………… XX,XXX
Amortization of discount for first half-year
Dr Interest expense (I/S) ………………... XX,XXX

Cr Cash (B/S) ……………………………. XX,XXX
Cash interest paid
Or combined as follows
Dr Interest expense (I/S) ………………... XX,XXX
Cr Cash (B/S) ……………………………. XX,XXX
Cr Unamortized discount (B/S) ………… XX,XXX
Interest paid for period ended 30 June 20x0
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Journal entry as at 30 June 20x0:

Dr Amortization of discount (I/S) …… 789,411
Cr Unamortized discount (SFP) ………… 789,411
Amortization of discount for first half year
Dr Interest expense (I/S) …………… 2,000,000

Cr Cash (SFP) ………… 2,000,000
Cash Interest paid
Or two entries can be combined:

Cr Cash (SFP) ………… 2,000,000
Cr Unamortized discount (SFP) 789,411
Interest expense for period ended 30 June 20x0
103

Journal entry as at 31 Dec 20x0:


Cr Cash (SFP) ………… 2,000,000
Cash Interest paid

Cr Cash (SFP) ………… 2,000,000
Interest expense for period ended 31 Dec 20x0
104

Journal entry as at 30 Jun 20x1:


Cr Cash (SFP) ………… 2,000,000
Cash Interest paid

Cr Cash (SFP) ………… 2,000,000
Interest expense for period ended 30 June 20x0
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Journal entry as at 31 Dec 20x1:


Cr Cash (SFP) ………… 2,000,000
Cash Interest paid

Cr Cash (SFP) ………… 2,000,000
Interest expense for period ended 31 Dec 20x0
106
Date Cash Effective Amortized Unamortized Carrying Eq option

1 Jan 20x0 $7,019,620 $92,980.380 $7,019,620
30 Jun 20x0 $2,000,000 $2,789,411 $789,411 6,230,209 93,769,791 7,019,620
31 Dec 20x0 2,000,000 2,813,094 813,094 5,417,115 94,582,885 7,019,620
30 June 20x1 2,000,000 2,837,487 837,487 4,579,628 95,420,372 7,019,620
31 Dec 20x1 2,000,000 2,862,611 862,611 3,717,017 96,282,983 7,019,620
30 June 20x2 2,000,000 2,888,489 888,489 2,828,528 97,171,472
31 Dec 20x2 2,000,000 2,915,144 915,144 1,913,384 98,086,616
30 June 20x3 2,000,000 2,942,598 942,598 970,786 99,029,214 CA ngày

31 Dec 20x3 2,000,000 2,970,786 970,786* 0 100,000,000 hoàn trả
Total $16,000,000 $23,019,620 $7,019,620
107
Partial Conversion of a Bond before Maturity
• Convertible bonds are exercised if there is economic interest (e.g. when

stock price has appreciated considerably and when conversion will yield
immediate capital gain)
The following are recorded when partial conversion occurs:

1. Issue of paid-up shares on conversion,
2. The balance in the unamortized discount on the bond that is adjusted
proportionately
3. A proportionate amount of capital reserve that is transferred to issued
share capital
4. The carrying value of the bond attributable to the partial conversion is
derecognized
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Illustration 2: Amortization Schedule with Partial Conversion

Eq- option: 7,019,620 *20%= 1.403.924 Eq- Share capital: 20.487.998
L: 19.084.074

1 Jan 20x0 $7,019,620 $92,980.380
30 Jun 20x0 $2,000,000 $2,789,411 $789,411 6,230,209 93,769,791
31 Dec 20x0 2,000,000 2,813,094 813,094 5,417,115 94,582,885
30 June 20x1 2,000,000 2,837,487 837,487 4,579,628 95,420,372
Partial conversion (915,926) (19,084,074)
31 Dec 20x1 1,600,000 2,290,089 690,089 2,973,613 77,026,387
30 June 20x2 1,600,000 2,310,792 710,792 2,262,821 77,737,179
31 Dec 20x2 1,600,000 2,332,115 732,115 1,530,706 78,469,294
30 June 20x3 1,600,000 2,354,079 754,079 776,627 79,223,373
31 Dec 20x3 1,600,000 2,376,701 776,627 0 80,000,000
109
Journal Entries Pertaining to Conversion of Bond
Conversion of bond as at 30 June 20x1

Dr 4% Bond payable 20,000,000 (20%
x $100 million)
Dr Capital reserve – Equity options 1,403,924 (20% x
$7,019,620)
Cr Ordinary shares 20,487,998
(Residual)
Cr Unamortized discount on bond 915,926
Conversion of bond to equity
110
Redemption of Compound Financial Instruments
• The issuing firm may wish to redeem the instrument if there

are interest rate changes subsequent to the issue of a
compound financial instrument.
– E.g. if I/R had fallen significantly since the date of issue,
the issuing firm could redeem the instrument and reissue
another one with a lower I/R (make economic sense to save
interest expense)
– IAS 32 AG33 guides accounting for redemption.
– The consideration paid and transaction costs are allocated
to the liability and equity components of instrument at
transaction date.
111
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1 Jan 20x0 $7,019,620 $92,980.380
30 Jun 20x0 $2,000,000 $2,789,411 $789,411 6,230,209 93,769,791
31 Dec 20x0 2,000,000 2,813,094 813,094 5,417,115 94,582,885
30 June 20x1 2,000,000 2,837,487 837,487 4,579,628 95,420,372
31 Dec 20x1 2,000,000 2,862,611 862,611 3,717,017 96,282,983
30 June 20x2 2,000,000 2,888,489 888,489 2,828,528 97,171,472
31 Dec 20x2 2,000,000 2,915,144 915,144 1,913,384 98,086,616
30 June 20x3 2,000,000 2,942,598 942,598 970,786 99,029,214
31 Dec 20x3 2,000,000 2,970,786 970,786* 0 100,000,000
Total $16,000,000 $23,019,620 $7,019,620
112
Illustration 3:
Redemption
• Same facts as in illustration 1. On 31 Dec 20x1, market interest rate for similar
bond (based on illustration 1) with no conversion feature was 4% per annum.
Company decided to redeem the convertible bond by:
– Repurchasing it for $108 million
– Redemption price is allocated between debt and equity components
Tính lại FV của các thành phần của CC vào ngày hoàn trả (xem bảng trang sau)
PV of interest payments (remaining 4 payments of $7,615,457

2,000,000 at 2%) (theo IFRS 13: PV ở đây chính là FV)
PV of principal at maturity ………………………………. 92,384,543
Value of debt component (FV) của L…………………….. $100,000,000
Value of equity component (FV) của Eq…………………… 8,000,000
Redemption price (FV của compound)---………… $108,000,000
113
2. FV of similar debt without call

option:
Int. rate: 2.0%/6m
Total cash Discount

6(M) Coupon Principal flow factor Present value
1 2,000,000 2,000,000 0.980 1,960,784
2 2,000,000 2,000,000 0.961 1,922,338
3 2,000,000 2,000,000 0.942 1,884,645
4 2,000,000100,000,000 102,000,000 0.924 94,232,233
FV(L)-
Total 31/12/X1 100,000,000
Trùng hợp ngẫu nhiên khi LSTT là 2%/kỳ 6 tháng -> PV or FV (L) ngày 31/12/X1=
MG= 100.000.000 $
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Illustration 3: Allocation of Redemption Price between Debt

As at date of redemption, carrying values of debt and equity components:
Carrying amount of debt component $96,282,983* FV(L): 100.000.000
Carrying amount of equity component 7,019,620 FV(Eq): 8.000.000
*Carrying amount as at 31 Dec 20x1 (refer to illustration 1)
• The difference between redemption amount and the carrying value is

allocated to the debt and equity components:
Difference between FV and carrying value of debt $3,717,017
component
Difference in value of equity component 980,380
Difference between redemption and carrying value $4,697,397
Chênh lệch (FV) và CA của L = 100.000.000 – 96.282.983 = 3.717.017 (ngẫu

nhiên trùng chiết khấu chưa phân bổ)
(FV của thành phần Eq ) luôn là còn lại ( 108.000.000- 100.000.000) (chú ý t/h
này ngẫu nhiên FV(L)= Mệnh giá
115

• Journal entry to record the redemption of the convertible bond:

CL (FV-CA)
Dr 4% Bond payable 100,000,000 đưa vào P/L
Dr Bond redemption expense 3,717,017
Dr Capital reserve – Equity Option 8,000,000
Cr Unamortized discount on bonds 3,717,017
Cr Cash Ghi giảm 108,000,000
Eq theo FV
Redemption of convertible bonds
Ghi giảm CK
chưa phân bổ
T/h này ngẫu nhiên lỗ phần thu hồi phần L = chiết khấu chưa phân bổ
116
2. Fair value of similar debt without call

option:
Interest rate: 2.5%
Total cash Discount Present

Year Coupon Principal flow factor value
1 2,000,000 2,000,000 0.976 1,951,220
2 2,000,000 2,000,000 0.952 1,903,629
3 2,000,000 2,000,000 0.929 1,857,199
4 2,000,000100,000,000 102,000,000 0.906 92,406,966
Total 98,119,013
Giả sử LSTT: 2,5%/6T-> PV (hay FV) của (L)= 98.119.013
117
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As at date of redemption, carrying values of debt and equity components:
Carrying amount of debt component $96,282,983*
Carrying amount of equity component 7,019,620
*Carrying amount as at 31 Dec 20x1 (refer to illustration 1)
• The difference between redemption amount and the carrying value is

allocated to the debt and equity components:
Difference between FV and carrying value of debt $1,836,030
component
Difference in value of equity component 2.861.367
Difference between redemption and carrying value $4,697,397
Chênh lệch (FV) và CA của L = 98.119.013 – 96.282.983 = 1.836.030 (khác chiết

khấu chưa phân bổ 3,717,017)
(FV của thành phần Eq ) luôn là còn lại ( 108.000.000- 98.119.013)
= 9.880.987 -> chênh lệch (FV & CA của (eq)= 9.880.987- 7.019.620= 2.861.367
118

LST: 2,5%
• Journal entry to record the redemption of the convertible bond:

CL (FV-CA)
Dr 4% Bond payable 100,000,000 đưa vào P/L
Dr Bond redemption expense 1,836,030
Cr Cash Ghi giảm 108,000,000
Eq theo FV
Redemption of convertible bonds
Ghi giảm CK
chưa phân bổ
119
Tóm tắt khi DN hoàn trả (khi LSTT giảm)

1. Tính CA(GTGS) của Compound (CCPH) (thành phần L = MG- chiết
khấu chưa phân bổ & Eq) tại thời điểm hoàn trả (mua lại CC)
2. Tính FV của từng thành phần (khi hoàn trả):
1. Thành phần L: tính PV (vào ngày hoàn trả theo LSTT vào ngày hoàn trả)
2. Thành phần Eq = (FV của compound ngày hoàn trả)- (PV /hay gọi là FV của L ngày
hoàn trả)
3. Lưu ý FV của compound ngày hoàn trả chính là số tiền thực chi ra mua lại (hoàn trả
CC)
3. Chênh lệch (CA) – FV của từng thành phần (L & Eq): Thành phần nào
tính cho thành phần đó
4. Hạch toán:
1. Thành phần L: ghi giảm toàn bộ (giảm MG & chiết khấu chưa phân bổ) và chênh lệch
ghi nhận vào (P/L) trong kỳ
2. Thành phần Eq: ghi giảm theo FV ngày hoàn trả
Chú ý: Thành phần Eq (option- của CCPH) sau khi thu hồi công cụ có
thể còn số dư (do Fv ngày hoàn trả và CA ngày hoàn trả khác nhau):
IAS 32 không hướng dẫn xử lý chênh lệch này.
120
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Inducing Early Conversion of a Bond

1 Jan 20x0 $7,019,620 $92,980.380
30 Jun 20x0 $2,000,000 $2,789,411 $789,411 6,230,209 93,769,791
31 Dec 20x0 2,000,000 2,813,094 813,094 5,417,115 94,582,885
30 June 20x1 2,000,000 2,837,487 837,487 4,579,628 95,420,372
31 Dec 20x1 2,000,000 2,862,611 862,611 3,717,017 96,282,983
30 June 20x2 2,000,000 2,888,489 888,489 2,828,528 97,171,472
31 Dec 20x2 2,000,000 2,915,144 915,144 1,913,384 98,086,616
30 June 20x3 2,000,000 2,942,598 942,598 970,786 99,029,214
31 Dec 20x3 2,000,000 2,970,786 970,786* 0 100,000,000
Total $16,000,000 $23,019,620 $7,019,620
121
Inducing Early Conversion of a Bond
• Continued from illustration 1:

– Company changed conversion ratio to 0.8 ordinary shares (from 0.75) if bond holders
converted the bond before 31 Jan 20x2
– Share price on 2 Jan 20x2 was $2 per share
– New shares to be issued on full conversion = 80 million vs. 75 million
– Cost of inducing the conversion = $10,000,000 ($2 x 5,000,000 [increase in new shares])
• Journal entry
Dr 4% Bond payable 100,000,000

Dr Inducement expense 10,000,000
Cr Share capital 113,302,603
Inducement of early conversion
122
Adjustment Provisions
• It is common for convertible instruments to contain adjustment

clauses, which change the conversion ratio upon the occurrence of
certain events
– The intent of such clauses in to avoid any dilution in the
convertible instrument holder’s interests in the issuer’s equity
arising from the event that was not originally envisaged.
– Such clauses should generally not taint the fixed-for-fixed
requirement, resulting in the instrument being classified as a
financial liability if such clauses for adjustment are in the terms
and conditions of the original instrument and the natures &
extent of the adjustment is designed effectively to compensate
for any dilution
123
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Common Adjustment Clauses in Compound Financial Instruments
Event Detailed Description

If the number of issued shares shall be altered as a result of the event, the conversion price shall
Consolidation,
be adjusted by multiplying the conversion price in force immediately before such alteration by the
subdivision, or
fraction: A/B
reclassification
Where A = the aggregate number of issued shares immediately before alteration
of shares
B = the aggregate number of issued shares immediately after alteration.
If the issuer shall issue any shares credited as fully paid to the holders of shares by way of
capitalisation of profits or reserves including shares paid out of distributable profits or reserves
Capitalization of (except script dividend) and would not have constituted a
profits or capital distribution, the conversion price shall be adjusted by multiplying the conversion price in
reserves force immediately before such issue by the fraction: A/B
Where A = the aggregate number of issued shares immediately before alteration
B = the aggregate number of issued shares immediately after alteration.
If the issuer shall pay or make any capital distribution to shareholders (except by way of script
dividend or capitalisation of profits), the conversion price in force immediately before such capital
distribution by the fraction: (A – B)/A
Capital
Where A = the current market price of one share on the last trading day immediately preceding
distribution
the date on which the capital distribution is publicly announced
B = the fair market value on the date of such announcement of the portion of the capital
distribution attributable to one share.
124
124
Effect of the Separation of Debt and Equity Elements in

a Compound Financial Instrument
No split accounting Split accounting
Income statement Net earnings higher Net earnings lower
Statement of financial Higher carrying amount; Lower carrying amount;

position lower equity higher equity
Selected financial ratios
Net profit margin Higher Lower
Debt-equity ratio Higher Lower
Return on equity Higher Lower
Times interest earned Higher Lower
125
125
Allocation of Transaction Costs
• Cost incurred in issuing debt instruments, and convertible bonds

– Include professional fees, registration fees, stamp duties, and advertising costs
Transaction cost on debt Transaction cost on equity
Accounted for as yield Accounted for as deduction

adjustments to the from equity after deducting any related
effective interest rate income tax benefit
E.g. origination fees received to create

the debt, commitment fees received to E.g. investment management services
originate a loan, and origination fees paid fees charged for servicing a loan
on issuing debt
126
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Allocation of Transaction Costs to Debt and Equity Components
Amount allocated to debt component
= Fair value of debt component x Transaction costs

Total proceeds of convertible bond
Amount allocated to equity component
= Value of equity component x Transaction costs

Total proceeds of convertible bond
127
128
43

Chapter 2 - FI-A

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Chapter 2 - FI-A

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12/27/2022

Nguyễn Thị Thu Hiền

Contents I. Dinh nghia va phan loai

Vi du: A phat hanh trai phieu, B mua trai phieu

Condition for Recognition as Equity the Perspective of

b, khong co nghia vu trao doi cctc trong

Example: An entity issues preference shares with a par value of CU

ii. Instruments settled in an entity’s own equity instruments

Non-derivatives Derivatives settleable in

Apply the “fixed for fixed

Classification process for instruments settled in an

(a) Apply the “fixed test”

1) A contract to deliver a variable number of own equity instruments equal in value to

(a) Apply the “fixed test”

The shares must be classified as financial liabilities as the delivery of ordinary

(b) Apply fixed for fixed test

Within the scope of Within the scope of

Example: Call share option that meets the definition of equity

Example: Call share option that fails the definition of equity

II.Classification 2. Phan loai TSTC - NPT tai chinh

ve DTien trong tuong lai theo hop dong

(1) Contractual Cash Flow Characteristics Test

• The debt instrument meets the contractual cash flow

Contractual cash flow test

time value credit risk

✓ Fixed rate loan => 10 mil; 4% ꭕ Convertible bond => can be

✓Floating rate loan => 10 mil; 3M LIBOR +1% converted to equity

✓ Capped variable rate loan => 10 mil, 3M 10 mil; 6% - 3M LIBOR

LIBOR +1%, max 5%

Contractual Cash Flow Characteristics Test – Examples

(2)Business Model Test

• An entity's business model refers to how it manages its financial assets

Business Model Test – Examples

Classification of financial assets (IFRS 9)

Classification of financial assets (IAS 39)

Classification of financial assets (IAS 39)

FA at fair value Held-to-maturity Loans and Available-for- sale

= fixed / determinable = created by entity

II. FAIR VALUE through III. FAIR VALUE

Classification of financial liabilities

I. FL at fair value through profit or loss II. FL at amortized cost

Held for trading Designated at FVTPL All other liabilities

LSTT: Tinh tai mot thoi diem

1.Measurement: Initial Recognition CPGD = 0 => LS thuc = LS thi

- Chenh lech: Tien lai va thu nhap lai =>

2.1. Accounting for FA at amortized cost Dao han 31/12/X10

• A financial asset is measured at amortized cost if:

• Prepayment is considered as payment of principal and interest if:

- khong co phu troi, chiet khau

Illustration 9.7- Measurement at amortized cost

2.1. Accounting for FA at amortized cost

Dr Interest income/amortized premium XX,XXX 31/12/X4: co tuc nhan duoc: 2.000

Illustration 9.7- Measurement at amortized cost

1 July 20X4: Dr- Investment in debt security (AC):.......100.000

5 98479 6000 1521 7521 100000 7,64%

2.2. Accounting for FA at FVTPL

• Two sub-categories of FVTPL:

2.2. Accounting for FA at FVTPL

• Journal entries for measurement at FVTPL (debt security)

Dr Cash ………………………. ……. XX,XXX

Illustration 9-11a- FA as FVTPL – Debt security

Refer to details in Illustration 9-7

✓ Fair value at 31 Dec 20X4:............................................$ 104.000 1.486