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Summary IFRS 9: Financial Instruments (FRK201/300)
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IFRS 9: Financial Instruments recognition and measurement of financial instruments
Financial assets & financial liabilities:. no equity instruments
Introduction:
Financial assets & financial liabilities initially recognised at:
FAIR VALUE + OR – TRANSACTION COSTS
If FairV through P/L then initially recognised only at:
FAIR VALUE (no tx costs)
Tx costs excl. admin, holding, finance, debt premiums & discounts
If financial asset is “Trade Debtors” and it doesn’t have a significant
financing component → recognised at tx price (see par 5.1.3)
Financial Assets: fair value determined at trade date
Difference between fairV and tx price = day 1 gain/loss
If an upfront fee is paid, the financial asset/financial liability initially recognised is
↓ed
Financial Liabilities:
Classifications: (2)
O Amortised cost (automatic designation) → not held for trading
O FairV through Profit or Loss →
held for trading; or
designated on initial recognition
a. Amortised Cost
Steps:
Calc fairV & recognize day 1 gain/loss (if necessary)
Calc effective “i”
Pmts comprise:
O increase in liability
O interest expense
1
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DR CR
Bank (SFP) xxx
Initial recog
Debenture Liability (SFP) xxx
Debenture Liability (SFP) x
Bank (SFP) x
Tx costs
Calculate a new effective interest → use this new ‘i’
for the AMORT function to calc interest pmts (jnl
below)
Interest Expense (P/L) xxx
Pmt of
Bank (SFP) xx
interest
Debenture Liability (SFP) x
b. Fair Value through Profit or Loss
Don’t use effective ‘i’ AMORT
Use the fair values given in the question to adjust fair value at end of each rep
period
Tx costs recognised in P/L
DR CR
Bank (SFP) xxx
Initial recog
Debenture Liability (SFP) xxx
Fair value adjustment (P/L) xx
FairV
Debenture Liability (SFP) x
adjustment
Bank (SFP) x
i.Designated
Profits or losses recognised in P/L except:
O the component that relates to liability credit risk → this is recognised
in OCI
2
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