Home / My courses / FAC621S / General / Week 11 - 14 / IFRS 7 & 9, IAS 32 Financial instruments

Financial Accounting 202_S2_2023

 Back to course

IFRS 7 & 9, IAS 32 Financial instruments

The book holds content for weeks 7 - 9

 

Topic title: IAS 32, IFRS 7 & 9 Sub-topic title: Financial assets classification - continued
Financial instruments


Competence/Attributes Fair value through other comprehensive income (FVOCI - debt)

1.      Account for financial instruments •        the objective is to hold to collect contractual cash flows and well as hold to sell.

  •        this classification applies to investment in debt instruments that meet the condition of
contractual cash flow (CCF) - i.e. give rise to cash flows at specified date and the cash flow is so
Learning Outcomes:
payment of principal and interest on the outstanding principal; and
2.      Understand financial asset
•        business model (BM)- held to collect CCF and sell
classification
Fair value through profit and loss
3.      Understand financial asset
classification model •        Financial assets as fair value through profit and loss (FVPL) applies

•        to any financial assets that does not meet the requirements to be classified as amortised c
(AC) or fair value through other comprehensive income (FVOCI)

•        Financial assets that are designated as FVPL in order to avoid  an accounting mismatch

•        classification FVPL arising from accounting mismatch only made at initial recognition and i
Content Prerequisites
irrevocable.
-        financial assets -        Conceptual
Fair value through other comprehensive income (FVOCI - equity)
through other framework
comprehensive •        classification that may be made if the financial instrument is an:
income -        Double
entry principles •        investment in equity instrument that is not held for trading and not for contingent considera
-        financial assets in an IFRS 3 buz combination
through profit or loss  
•        classification only possible on initial recognition and its irrevocable, also forbids reclassifica
-        FCOCI – equity Remark to P/L.

-        Classification -        Attempt

Classification model
illustrations on
model
non- adjusting The contractual cash flows criteria
  events
•        Cash flows that are stipulated in the contract is referred to as CCF
Prescribed text:  
•        FA classified as AC or FVOCI (debt instrument only) must have CCF that occurs and must
-        Service C. L relate solely to payment of principal sum and interest on that principal (SPPI)
(Latest) Gripping
GAAP: Your Guide to •        the principal is the FV of the FA at initial recognition while the interest is the return that
International compensates the holder for the time value and risks (credit and others like liquidity, lending, etc.
Financial Reporting
•        Illustration: refer to example 3, pg 986, Gripping GAAP 2019/2020
Standards,
LexisNexis The business model criteria

•        Considers entity’s intention in holding FA - whether hold to collect (CCF) or realise gain fro
changes in FV through sale (FVPL) or hold to collect and sell (FVOCI)

•        Management personnel is responsible for determining business model using all relevant
evidences at the assessment date

•        Determine the following: What was initial intention? Is it to collect contractual cash flows? W
intention to obtain cash through selling FA? Was the need for cash a situation of liquidity?

•        Illustration: refer to example 4, pg 988, Gripping GAAP 2019/2020

  

 Back to course

eLearning implementation for the service of students, academic staff, researchers and administrators.

Quick Links

Need assistance to migrate your online courses? If so, click here and fill in the requested information. Fill in the information even though
you are planning to migrate your own courses.

Follow Us

 

Contact
13 Jackson Kaujeua Street, Windhoek, Namibia

 Phone: +264-61-207-2580

 E-mail: tlu@nust.na

Deployed by TLU and Theme developed by LMSACE.com. Hosted by DICT

Data retention summary

Get the mobile app Namibia University of Science and Technology (NUST) - This VLE is hosted by DICT - (C) 2022.