Notes of a Third year student studying Bachelors of Accounting at the University of the Free State. With this notes that i have compiled, i was able to proudly say that i received a distinction in Financial Accounting by using this notes. If you are struggling with Financial Accounting use this not...
Evaluate the significance
of financial instruments
for its financial position
and performance
IFRS 7.7
Carrying amount of each category Equity instruments @
Categories of financial should be presented EITHER on the FVtOCI
assets/liabilities face of the SFP Par 11A/11B
Par. 8 OR in the notes
Net profit/loss of each category should
Income/Expenses/Profits/ be presented EITHER on the face of
Losses w.r.t the statement of profit or loss and other
Financial comprehensive income
assets/Liabilities OR in the notes
Par. 20
Summary of important accounting
Accounting policies with policies for all financial instruments
regards to Financial
assets/Liabilities
Par. 21
Disclose the fair value of FAs and FLs
Par 25
, IFRS 9 Financial instruments: Classification
How to determine the category:
Business model
Contractual cash Classification
(cash flows or FV flow characteristics
related)
How an entity manages its FAs in order to Per instrument basis.
generate cash flows.
What does the cash flows present?
What is management’s intention for the
Payments of the principal/interest or
instrument?
dividends?
Is the intention to collect the cash flows or is the
intention to speculate/trade and sell the FAs or
perhaps both? At fair value
Debt instrument at fair value through other
comprehensive income (FVOCI)
Equity instrument at fair value through other
comprehensive income (FVOCI)
At fair value through profit or loss (FVPL)
At amortised cost
, Financial Assets
4.1.2 5.7.5 NORM!! 4.1.4
4.1.2A
# Equity instrument cannot When it does not meet criteria of
Business model others
be in this category # Entity makes a choice to
Business model classify the equity instrument Mandatorily measured at fair value
Business model # The overall business model is into this category through profit or loss
# The overall business model too collect contractual cash → held for trading
is too HOLD the investment flows AND selling the asset # Irrevocable decision → acquired principally for the
to collect contractual cash purpose of selling or
flows. repurchasing it in the near future
Contractual cash flow
# The cash flow payments of Only for equity instruments
Contractual cash flow principal and interest are on NOT HELD FOR TRADING
# The cash flow payments of specific dates Voluntary: Entity chose to
principal and interest are measure investment at fair value
on specific dates through profit or loss
→ must be at initial recognition,
irrevocable
DA 20.11 4.1.3 DA 20.13
Even if not held Principal = fair value @ initial recognition
Even is still held
until maturity Interest = consideration for time value of money and credit risk @ end of year
date
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