Summary IFRS 9: Financial Instruments (FRK201/300)

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




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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




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