CHAPTER 16

Investment in Debt Securities

Tero, Lyka Mae L.
Reporter
Learning Objectives:

 Identify and describe different types of bonds

 Identify the classification of financial assets for debt
securities
 Describe the initial recognition, initial measurement,
subsequent measurement, reclassification, derecognition
and financial statement presentation of investment in debt
securities
 Differentiate financial asset and investment in debt
securities under full PFRS and PFRS for SMEs
 Differentiate the accounting for FVTPL, FVTOCI and
FAAC
 Calculate the correct amount of investment and its related
accounts.
BOND is a formal unconditional promise made under
seal to pay a specified sum of money at a determinable
future date and to make periodic interest payments at a
stated rate until the principal sum is paid.
Take note:

A BOND is evidenced by a certificate and the

contractual agreement between the issuer and investor
is contained in another document known as “BOND
INDENTURE”.
 TYPES OF BONDS
1. Term Bonds - bonds which matures on a single date.
2. Callable Bonds - bonds which may be redeemed prior to
maturity.
3. Convertible Bonds - bonds that entitle bondholder to convert the
bonds into shares of the issuing entity.
4. Registered Bonds - bonds in which the names of bondholder are
registered in the books of the bond issuer.
5. Coupon Bonds - bonds in which the holder of the bond
certificate is the acknowledged bondholder. The bond issuer does
not maintain any record to monitor persons who own the bonds.
6. Collateral Trust Bonds - bonds secured by stocks and bonds of
other corporation.
7. Mortgage Bonds - bonds secured by a mortgage on real
properties.
8. Debenture Bonds - bonds without any security or collateral.
 CLASSIFICATION, MEASUREMENT AND
PRESENTATION
Under PFRS 9, the classification of a debt security depends on the
BUSINESS MODEL used by the entity the classification are as follows:

1. INVESTMENT AT FAIR VALUE THROUGH PROFIT OR LOSS

(TRADING SECURITIES) – The business model has an objective of
HOLDING the securities for SHORT-TERM PROFITS.
2. INVESTMENT AT FAIR VALUE THROUGH OTHER
COMPREHENSIVE INCOME (AVAILABLE FOR SALE
INVESTMENTS) – The business model of the company has an objective of
HOLDING the debt security investment primarily to COLLECT
CONTRACTUAL CASH FLOWS but also has an objective of HOLDING the
debt security for sale to take advantage of business opportunities.
3. INVESTMENT AT AMORTIZED COST (HELD TO MATURITY
INVESTMENTS) - The business model of the company has an objective of
HOLDING debt securities investment primarily to COLLECT
CONTRACTUAL CASH FLOWS and cash flows are in the form of principal
and interest with fixed maturity date.
THANK YOU AND GOD BLESS!!!