IFRS 9- financial
instruments
1
,Contents
IFRS 9- financial instruments................................................................................................................................................... 1
PREFERENCE SHARES .............................................................................................................................................................. 7
MEASUREMENT .................................................................................................................................................................... 16
FINANCIAL ASSETS ............................................................................................................................................................ 16
PREFERENCE SHARES ............................................................................................................................................................ 17
PREFERENCE SHARES (issued= issuer side) .......................................................................................................................... 18
PREFERENCE SHARES ISSUED : cumulative, discretionary .................................................................................................. 19
Preference shares issued ...................................................................................................................................................... 20
DEBENTURES HELD (OCI) ...................................................................................................................................................... 21
DEBENTURES: ....................................................................................................................................................................... 22
BUY debentures through OCI (debentures held ) ............................................................................................................... 24
DEBENTURES issued, COMPOUND financial instrument .................................................................................................... 25
DEBENTURES :NO DISCOUNT on compound FI .................................................................................................................... 26
DEBENTURES :DISCOUNT (ISSUED= issuer side) on compound FI ...................................................................................... 27
Investment in equity instruments ....................................................................................................................................... 30
Ordinary share investment .................................................................................................................................................. 31
Investments made ................................................................................................................................................................ 32
CLASSIFICATION FINANCIAL LIABILITY ............................................................................................................................. 33
MEASUREMENT of FINANCIAL LIABILITY ......................................................................................................................... 33
TAX EFFECT ON FINANCIAL INSTRUMENTS........................................................................................................................... 36
Application to PRIMARY FINANCIAL ASSETS ................................................................................................................... 37
APPLICATION TO PRIMARY FINANCIAL LIABILITES ......................................................................................................... 40
APPLICATION TO DERIVATIVES ........................................................................................................................................ 41
IMPAIRMENT OF FINANCIAL ASSETS: .................................................................................................................................. 42
IMPAIRMENT (DEBTORS) (5.5.15) ......................................................................................................................................... 48
IMPAIRMENT (MEASUREMENT) (5.5.17) .......................................................................................................................... 50
RECLASSIFICATION: FINANCIAL ASSETS ................................................................................................................................ 50
DERIVATIVES ......................................................................................................................................................................... 51
TYPES OF FEC’s .................................................................................................................................................................. 52
FEC SUMMARY ...................................................................................................................................................................... 52
EXAMPLE 4 – basic OTC FEC ................................................................................................................................................. 53
FEC OTC (with renewal ) ....................................................................................................................................................... 55
EXAMPLE 4.1 (over the counter FEC- settlement within 1 year) ........................................................................................ 56
EXAMPLE: FEC OTC ............................................................................................................................................................... 57
2
,EXAMPLE 4.2-OTC FEC- settlement AFTER year end ........................................................................................................... 58
CLASS EXERCISE 2 ................................................................................................................................................................. 60
EXAMPLE 4.3- OTC FEC – RENEWAL ..................................................................................................................................... 62
QUESTION 4 (MARGINING) .................................................................................................................................................. 67
EXAMPLE : MARGINING ....................................................................................................................................................... 68
OPTIONS ............................................................................................................................................................................... 69
Example: options .................................................................................................................................................................. 70
Class example: Option .......................................................................................................................................................... 71
Interest rate exchange agreements ..................................................................................................................................... 72
Interest rate swap ............................................................................................................................................................. 72
EXAMPLE: SWAP................................................................................................................................................................... 74
Machine (IAS 16) .................................................................................................................................................................. 75
Loan....................................................................................................................................................................................... 76
Sales ...................................................................................................................................................................................... 77
3
, STATEMENT OF FINANCIAL POSITION
ASSETS
investments
listed ( @ market value at year end )
unlisted only if for long term )
loan TO (@ amortised cost)
Current assets
investments unlisted (if for speculative purposes)
Debtors (@ PV)
EQUITY AND LIABILITIES
equity
share capital (ordinary
+ portion of convertible debentures relating to equity
Fair value reserve (any adjustment to items through OCI)
(OB + FV adjustment through PL
+ interest income on loan - interest expense
Retained earnings - dividend/interest expense
Non -current Liabilities
convertible debenture (PV of liability portion + interest expense - interest paid
= CB
redeemable preference shares (if the shares will be redeemed and dividends I
compulsory)
Current liabilities
redeemable preference shares (if there is a portion that will be redeemed within 12
months AFTER year end put it here
4
instruments
1
,Contents
IFRS 9- financial instruments................................................................................................................................................... 1
PREFERENCE SHARES .............................................................................................................................................................. 7
MEASUREMENT .................................................................................................................................................................... 16
FINANCIAL ASSETS ............................................................................................................................................................ 16
PREFERENCE SHARES ............................................................................................................................................................ 17
PREFERENCE SHARES (issued= issuer side) .......................................................................................................................... 18
PREFERENCE SHARES ISSUED : cumulative, discretionary .................................................................................................. 19
Preference shares issued ...................................................................................................................................................... 20
DEBENTURES HELD (OCI) ...................................................................................................................................................... 21
DEBENTURES: ....................................................................................................................................................................... 22
BUY debentures through OCI (debentures held ) ............................................................................................................... 24
DEBENTURES issued, COMPOUND financial instrument .................................................................................................... 25
DEBENTURES :NO DISCOUNT on compound FI .................................................................................................................... 26
DEBENTURES :DISCOUNT (ISSUED= issuer side) on compound FI ...................................................................................... 27
Investment in equity instruments ....................................................................................................................................... 30
Ordinary share investment .................................................................................................................................................. 31
Investments made ................................................................................................................................................................ 32
CLASSIFICATION FINANCIAL LIABILITY ............................................................................................................................. 33
MEASUREMENT of FINANCIAL LIABILITY ......................................................................................................................... 33
TAX EFFECT ON FINANCIAL INSTRUMENTS........................................................................................................................... 36
Application to PRIMARY FINANCIAL ASSETS ................................................................................................................... 37
APPLICATION TO PRIMARY FINANCIAL LIABILITES ......................................................................................................... 40
APPLICATION TO DERIVATIVES ........................................................................................................................................ 41
IMPAIRMENT OF FINANCIAL ASSETS: .................................................................................................................................. 42
IMPAIRMENT (DEBTORS) (5.5.15) ......................................................................................................................................... 48
IMPAIRMENT (MEASUREMENT) (5.5.17) .......................................................................................................................... 50
RECLASSIFICATION: FINANCIAL ASSETS ................................................................................................................................ 50
DERIVATIVES ......................................................................................................................................................................... 51
TYPES OF FEC’s .................................................................................................................................................................. 52
FEC SUMMARY ...................................................................................................................................................................... 52
EXAMPLE 4 – basic OTC FEC ................................................................................................................................................. 53
FEC OTC (with renewal ) ....................................................................................................................................................... 55
EXAMPLE 4.1 (over the counter FEC- settlement within 1 year) ........................................................................................ 56
EXAMPLE: FEC OTC ............................................................................................................................................................... 57
2
,EXAMPLE 4.2-OTC FEC- settlement AFTER year end ........................................................................................................... 58
CLASS EXERCISE 2 ................................................................................................................................................................. 60
EXAMPLE 4.3- OTC FEC – RENEWAL ..................................................................................................................................... 62
QUESTION 4 (MARGINING) .................................................................................................................................................. 67
EXAMPLE : MARGINING ....................................................................................................................................................... 68
OPTIONS ............................................................................................................................................................................... 69
Example: options .................................................................................................................................................................. 70
Class example: Option .......................................................................................................................................................... 71
Interest rate exchange agreements ..................................................................................................................................... 72
Interest rate swap ............................................................................................................................................................. 72
EXAMPLE: SWAP................................................................................................................................................................... 74
Machine (IAS 16) .................................................................................................................................................................. 75
Loan....................................................................................................................................................................................... 76
Sales ...................................................................................................................................................................................... 77
3
, STATEMENT OF FINANCIAL POSITION
ASSETS
investments
listed ( @ market value at year end )
unlisted only if for long term )
loan TO (@ amortised cost)
Current assets
investments unlisted (if for speculative purposes)
Debtors (@ PV)
EQUITY AND LIABILITIES
equity
share capital (ordinary
+ portion of convertible debentures relating to equity
Fair value reserve (any adjustment to items through OCI)
(OB + FV adjustment through PL
+ interest income on loan - interest expense
Retained earnings - dividend/interest expense
Non -current Liabilities
convertible debenture (PV of liability portion + interest expense - interest paid
= CB
redeemable preference shares (if the shares will be redeemed and dividends I
compulsory)
Current liabilities
redeemable preference shares (if there is a portion that will be redeemed within 12
months AFTER year end put it here
4
