阶段网课mikesbr独立录完结版基础文字a6financial instrument

Financial

InstrumentDefinitionsA

financial

instrument

is

‘any

contract

that

gives

rise

toa

financial

asset

of

one

entity

and

a

financial

liability

orequity

instrument

of

another

entity’(IAS

32,

para11)A

financial

asset

is

any

asset

that

is:cashan

equity

instrument

of

another

entitya

contractual

right

to

receive

cash

or

anotherfinancial

asset

from

another

entitya

contractual

right

to

exchange

financialinstruments

with

another

entity

under

conditionsthat

are

potentially

favorable

to

the

entityA

financial

liability

is

any

liability

that

is

a:contractual

obligation

to

deliver

cash

or

another

financialasset

to

another

entitycontractual

obligation

to

exchange

financial

instruments

withanother

entity

under

conditions

that

are

potentiallyunfavorablea

non-derivative

contract

for

which

the

entity

is

or

may

beobliged

to

deliver

a

variable

numberof

the

entity's

ownequity

instruments.

(IAS

32,

para11)An

equity

instrument

is

‘any

contract

that

evidences

a

residualinterest

in

the

assets

of

an

entity

after

deducting

all

of

itsliabilities'(IAS

33,

para11)Reporting

standardsIAS

32

Financial

Instruments:

Presentation

deals

with

theclassification

of

financial

instruments

and

their

financialstatement

presentationIFRS

7

Financial

Instruments:

Discourses

deals

with

thedisclosure

of

financial

instruments

in

financial

statementsIFRS

9

Financial

Instruments

is

concerned

with

the

initialand

subsequent

measurement

of

financial

instruments1

Classification

of

financial

liabilities

and

equityIAS

32

clarifies

that

an

instrument

is

only

an

equityinstrument

if

in

the

definition

of

a

financial

liability

are

not

met.IAS

32

does

not

classify

a

financial

instrument

as

equity

orfinancial

liability

on

the

basis

of

its

legal

form

but

on

thesubstance

of

the

transaction.Ex14

million

preference

shares

for

$2.50

each.They

are

notmandatorily

redeemable.

A

dividend

is

payable

if,

and

only

if,dividends

are

paid

on

ordinary

shares.A

financial

liability

exists

if

there

is

an

obligation

to

deliver

cash

oranother

financial

asset.There

is

no

obligation

for

X

to

repay

the

instrument.

Dividends

areonly

payable

if

they

are

also

paid

on

ordinary

shares.There

is

no

obligation

to

pay

dividends

on

ordinary

shares

sothere

is

no

obligation

to

pay

dividends

on

these

preference

shares.The

instrument

is

not

a

financial

liability.

The

proceeds

from

thepreference

share

issue

should

therefore

be

classified

as

equity

in

thestatement

of

financial

position.Ex2X

issued

1

million

preference

shares

for

$3

each.

No

dividends

arepayable.

X

will

redeem

the

preference

shares

in

three

years’

timeby

issuing

ordinary

shares

worth

$3

million.

The

exact

numberof

ordinary

shares

issuable

will

be

based

on

their

fair

value

on

thedateX

will

redeem

the

preference

share

with

a

variable

number

ofordinary

shares

worth

$3

million.

Therefore,

the

preference

shareshould

be

classified

as

liability

in

the

statement

financial

position.Ex32

million

preference

shares

for

$2.80

each.

No

dividends

arepayable.

The

preference

shares

will

be

redeemed

in

two

years’time

by

issuing

3

million

ordinary

sharesX

will

redeem

the

preference

share

with

a

fixed

number

ofordinary

shares.

Therefore,

the

preference

share

should

beclassified

as

equity

in

the

statement

financial

position.Interest

&

dividendsDividends

paid

in

respect

of

preference

shares

classified

asa

liability

will

be

charged

as

a

finance

expense

throughprofit

or

lossDividends

paid

on

shares

classified

as

equity

will

bereported

in

the

statement

of

changes

in

equityOffsettingIAS

32

states

that

a

financial

asset

and

a

financial

liability

mayonly

be

offset

in

very

limited

circumstances.

The

net

amountmay

only

be

reported

when

the

entityhas

a

legally

enforceable

right

to

set

off

the

amountsintends

either

to

settle

on

a

net

basis,

or

to

realise

the

assetand

settle

the

liability

simultaneously"(IAS

32,

para

42)2

Recognition

and

measurement

of

financial

liabilitiesInitial

recognition

of

financial

liabilitiesAt

initial

recognition,

financial

liabilities

are

measured

at

fair

valueIf

the

financial

liability

will

be

held

at

fairvalue

through

profitor

loss,

transaction

costs

should

be

expensed

to

the

statement

ofprofit

or

lossIf

the

financial

liability

will

not

be

held

at

fair

value

throughprofit

or

loss,

transaction

costs

should

be

deducted

from

itscarrying

amountSubsequent

measurement

of

financial

liabilitiesThe

subsequent

treatment

of

a

financial

liability

is

that

they

can

bemeasured

at

either

:amortised

costfair

value

through

profit

or

lossAmortised

costThe

initial

carrying

amount

of

a

financial

liability

measured

atamortised

cost

is

its

fair

value

less

any

transaction

costs

(the

‘netproceeds’

from

issue).A

finance

cost

is

charged

on

the

liability

using

the

effective

rate

ofinterest.

This

will

increase

the

carrying

amount

of

the

liabilityDr

Finance

cost(P/L)Cr

LiabilityThe

liability

is

reduced

by

any

cash

payments

made

during

the

yearDr

LiabilityCr

CashIllustrationOn

1

January

20X1

X

issued

a

loan

note

with

a

$50,

000nominal

value.

It

was

issued

at

a

discount

of

16%

of

nominalvalue.

The

costs

of

issue

were

$2,

000.

Interest

of

5%

of

thenominal

value

is

payable

annually

in

arrears.

The

bond

mustbe

redeemed

on

1

January

20X6

(after

5years

)

at

a

premiumof

$4,611.The

effective

rate

of

interest

is

12%

per

yearRequired:How

will

this

be

reported

in

the

financial

statements

of

X

overthe

period

to

redemption?SolutionThe

liability

will

be

initially

recognised

at

the

net

proceeds

receivedface

value50,000Less:16%

discount(8,000)Less:

Issue

costs(2,000)Initial

recognition

of

liability40,000The

liability

is

then

measured

at

amortised

cost:YearOpeningbalanceFinance

cost

(Liability

x12%)Cash

payments($50,000x5%)Closing

balance140,0004,800(2,500)42,300242,3005,076(2,500)44,8763448765,385(2,500)47,761447,7615,731(2,500)50,992550,9926,119(2,500)54,61127,111(12,500)TO:

Profit

or

lossTo:

Statement

of

cashflowsTo:

SOFPFair

valuethrough

profit

of

lossOut

of

the

money

derivatives

and

liabilities

held

for

tradingare

measured

at

fair

value

through

profit

or

loss.IllustrationOn

1

January

20X1,

X

issued

a

financial

liability

for

itsnominal

value

of

$10

million.

Interest

is

payable

at

a

rate

of5%

in

arrears.

The

liability

is

repayable

on

31

December20X3.

X

trades

financial

liabilities

in

the

short-term.At

31

December

20X1,

market

rates

of

interest

have

risento

10%Required:Discuss

the

accounting

treatment

of

the

liability

at

31December

20X1SolutionThe

financial

liability

is

traded

in

the

short-term

and

so

is

measured

at

fair

value

through

profitor

loss.

The

liability

must

be

remeasured

to

fair

value

at

the

reporting

dateAssuming

that

the

fair

value

of

the

liability

cannot

be

observed

from

an

active

market,

it

can

becalculated

by

discounting

the

future

cash

flows

at

a

market

rate

of

interestDateCash

flow(＄m)Discount

ratePresentvalue(＄m)31/12/X20.51/1.10.4531/12X310.51/1.128.68

9.13

The

interest

payments

are

$10m

x

5%

=

$

0.

5mThe

fair

value

of

the

liability

at

the

year-end

is

$9.13

millionThe

following

adjustment

is

requiredDr

Liability

($10m-$9.13m)Cr

Profit

or

loss$

0.87m$

0.87mPilot

paperQ1

Issue

of

convertible

bondOn

1

October

20X5,

Hill

issued

a

convertible

bond

at

par

value

of

$20

million

and

has

recorded

it

as

a

non-current

liability.

Thebond

is

redeemable

for

cash

on

30

September

20X7

at

par.Bondholders

can

instead

opt

for

conversion

in

the

form

of

a

fixednumber

of

shares.

Interest

on

the

bond

is

payable

at

a

rate

of

4%a

year

in

arrears.

The

interest

paid

in

the

year

has

been

presentedin

finance

costs.

The

interest

rate

on

similar

debt

without

aconversion

option

is

10%.Discount

factorsYearDiscount

rate

4%Discount

rate

10%10·9620·90920·9250·8263

Compound

instrumentsRequirement

aI. Discuss,

with

suitable

calculations,

how

theconvertible

bond

should

be

dealt

with

in

theconsolidated

financial

statements

for

the

yearended

30

September

20X6,

showing

anyadjustments

required.

(6

marks)Hill

has

issued

a

compound

instrument

because

the

bond

hascharacteristics

of

both

a

financial

liability

(an

obligation

to

repay

cash)and

equity

(an

obligation

to

issue

a

fixed

number

of

Hill’s

own

shares).IAS

32

Financial

Instruments:

Presentation

specifies

that

compoundinstruments

must

be

split

into:a

liability

component

(the

obligation

to

repay

cash);an

equity

component

(the

obligation

to

issue

a

fixed

number

of

shares).The

split

of

the

liability

component

and

the

equity

component

at

the

issuedate

is

calculated

as

follows:the

liability

component

is

the

present

value

of

the

cash

repayments,

discounted

using

the

market

rate

on

non-convertible

bonds;the

equity

component

is

the

difference

between

the

cash

received

andthe

liability

component

at

the

issue

date.Answer(iii) -

Convertible

bondThe

initial

carrying

amount

of

the

liability

should

have

been

measured

at

$17·9million,

calculated

as

follows:DateCash

flow$mDiscount

ratePresent

value$m30

September

20X60·80·9090·7330

September

20X720·80·826

17·1817·91The

equity

component

should

have

been

initially

measured

at

$2·1

million($20m

–

$17·9m).The

adjustment

required

is:Dr

Non-current

liabilitiesCr

Equity$2·1m$2·1mThe

equity

component

remains

unchanged.

After

initial

recognition,

the

liability

is

measured

at

amortised

cost,

as

follows:1

October

20X5Finance

charge

(10%)Cash

paid30

September

20X6$m$m$m$m17·91·8(0·8)18·9The

finance

cost

recorded

for

the

year

was

$0·8

million

and

so

must

beincreased

by

$1·0

million

($1·8m

–

$0·8m).Dr

Finance

costsCr

Non-current

liabilities$1·0m$1·0mThe

liability

has

a

carrying

amount

of

$18·9

million

as

at

the

reportingdate.2019/12

Q2Preference

sharesOn

1

October

20X8,

the

CEO

and

finance

director

each

paid

$2mcash

in

exchange

for

preference

shares

from

Stent

Co

whichprovide

cumulative

dividends

of

7%

per

annum.

These

preferenceshares

can

either

be

converted

into

a

fixed

number

of

ordinary

shares

in

two

years’

time,

or

redeemed

at

par

on

the

same

date,

atthe

choice

of

the

holder.The

finance

director

suggests

to

the

accountant

that

the

preference

shares

should

be

classified

as

equity

because

the

conversion

isinto

a

fixed

number

of

ordinary

shares

on

a

fixed

date

(‘fixed

forfixed’)

and

conversion

is

certain

(given

the

current

market

valueof

the

ordinary

shares).

(4

marks)AnswerConvertible

redeemable

preference

sharesIAS

32

defines

an

equity

instrument

as

any

contract

whichevidences

a

residual

interest

in

the

assets

of

an

entity

afterdeducting

all

of

its

liabilities.An

equity

instrument

has

no

contractual

obligation

to

delivercash

or

another

financial

asset,

or

to

exchange

financial

assets

orfinancial

liabilities

under

potentially

unfavourable

conditions.If

settled

by

the

issuer’s

own

equity

instruments,

an

equityinstrument

has

no

contractual

obligation

to

deliver

a

variablenumber,

or

is

settled

only

by

exchanging

a

fixed

amount

of

cash

or

another

financial

asset

for

a

fixed

number

of

its

own

equity

instruments.Preference

shares

which

are

required

to

be

converted

into

a

fixed

numberof

ordinary

shares

on

a

fixed

date

should

be

classified

as

equity

(this

isknown

as

the

‘fixed

forfixed’

requirement

to

which

the

finance

directorrefers).However,

a

critical

feature

in

differentiating

a

financial

liability

from

anequity

instrument

is

the

existence

of

a

contractual

obligation

of

the

issuer

either

to

deliver

cash

or

another

financial

asset

to

the

holder,

or

toexchange

financial

assets

or

financial

liabilities

with

the

holder,

under

conditions

which

are

potentially

unfavourable

to

the

issuer.In

this

case,

Stent

Co

has

issued

convertible

redeemable

preferenceshares

–

which

makes

little

commercial

sense

from

the

company’sperspective,

as

they

offer

the

holder

the

benefit

of

conversion

intoordinary

shares

if

share

prices

rise,

and

the

security

of

redemption

(at

the

choice

of

the

holder)

if

share

prices

fall.IAS

32

notes

that

the

substance

of

a

financial

instrument,

ratherthan

its

legal

form,

governs

its

classification

in

the

entity’sstatement

of

financial

position.A

preference

share

which

provides

for

mandatory

redemption

for

afixed

or

determinable

amount

at

a

fixed

or

determinable

future

date

or

gives

the

holder

the

right

to

require

the

issuer

to

redeem

the

instrument

at

a

particular

date

for

a

fixed

or

determinableamount

is

a

financial

liability.Because

the

preference

shares

offer

the

holder

the

choice

ofconversion

into

ordinary

shares

as

well

as

redemption

in

two

years’time,

the

terms

of

the

financial

instrument

should

be

evaluated

todetermine

whether

it

contains

both

a

liability

and

an

equitycomponent.Such

components

are

classified

separately

as

compound

financialinstruments,

recognising

separately

the

components

of

a

financialinstrument

which

creates

both

a

financial

liability

of

the

entity

(acontractual

arrangement

to

deliver

cash

or

another

financial

asset)

andan

equity

instrument

(a

call

option

granting

the

holder

the

right,

for

aspecified

period

of

time,

to

convert

it

into

a

fixed

number

of

ordinaryshares

of

the

entity).In

accordance

with

IFRS

9

Financial

Instruments,

when

the

initialcarrying

amount

of

a

compound

financial

instrument

is

allocated

to

its

equity

and

liability

components,

the

equity

component

isassigned

the

residual

amount

after

deducting

from

the

fair

value

ofthe

instrument

as

a

whole

the

amount

separately

determined

for

theliability

component.Stent

Co

would

measure

the

fair

value

of

the

consideration

inrespect

of

the

liability

component

based

on

the

fair

value

of

asimilar

liability

without

any

associated

equity

conversion

option.The

equity

component

is

assigned

the

residual

amount.Gearing

would

decrease

if

the

draft

financial

statements

hadincluded

the

preference

shares

within

equity:

the

correction

wouldincrease

non-current

debt

(the

present

value

of

the

futureobligations)

and

decrease

equity.【MJ：整个题目，重要】4

DerivativeDerivative.

A

derivative

has

three

characteristics:its

value

changes

in

response

to

an

underlying

variable(e.g.

share

price

or

interest

rate)it

requires

little

or

no

initial

net

investmentit

is

settled

at

a

future

date.Eg：Forward

contract,

future,

optionEx

-

Forward

contractOn

1

November

20X1

Johnson

took

out

a

speculative

forwardcontract

to

buy

coffee

beans

for

delivery

on

30

April

20X2

atan

agreed

price

of

$6,000

intending

to

settle

net

in

cash.

Due

to

a

surge

in

expected

supply,

a

forward

contract

for

delivery

on30

April

20X2

would

have

cost

$5,000

on

31

December

20X1.RequiredDiscuss,

with

suitable

calculations,

how

the

above

financialinstruments

should

be

accounted

for

in

the

financial

statements

ofJohnson

for

the

year

ended

31

December

20X1.AnswerIFRS

9

applies

to

those

contracts

to

buy

orsell

a

non-financia

item

that

can

be

settled

net

in

cash

or

another

financial

instrument,or

by

exchanging

financial

instruments

as

if

the

contracts

wefinancial

instruments(IFRS

9:

para.

2.4).These

are

consideredfinancial

contractsThe

fair

value

of

a

forward

contract

at

inception

is

zero.The

fair

value

of

the

contract

at

the

year

end

is:$Market

price

of

forward

contract

at5,000-year

end

for

delivery

on

30

AprilJohnson's

forward

price(6,000)Loss(1,000)A

financial

liability

of

$1,000

is

therefore

recognised

with

acorresponding

charge

of

$1,000

to

profit

or

loss.5

Recognition

offinancialassetsInitial

recognition

of

financial

assetsIFRS

9

says

that

an

entity

should

recognise

a

financial

asset

'when,and

only

when,

the

entity

becomes

party

to

the

contractualprovisions

of

the

instrument'(IFRS

9,

para3.1.1)Financialcontracts

vs

executory

contractsIFRS

9

applies

to

those

contracts

to

buy

orsell

a

non-financia

item

that

can

be

settled

net

in

cash

or

another

financial

instrument,or

by

exchanging

financial

instruments

as

if

the

contracts

wefinancial

instruments(IFRS

9:

para.

2.4).These

are

consideredfinancial

contractsHowever,

contracts

that

were

entered

into

(and

continue

to

be

held)for

the

entity's

expecte

Purchase,

sale

orusage

requirements

ofnon-financial

items

are

outside

the

scope

of

IFRS

9.These

are

executory

contracts.

Executory

contracts

are

contractsunder

which

neither

party

has

performed

any

of

its

obligations

orboth

parties

have

partially

performed

their

obligations

to

an

equalextent)(IAS

37:

para.

3).Executory

contracts

are

not

initially

recognised

in

the

financialstatements

unless

they

are

onerous,

in

which

case

a

provision

isrequired.Gustoso

is

a

public

limited

company

which

produces

a

range

of

luxury

Italianfood

products

which

are

sold

to

restaurants,

shops

and

supermarkets.Wheat

contractGustoso

purchases

significant

quantities

of

wheat

for

use

in

its

bread

and

pastaproducts.

These

are

high-value

products

on

which

Gustoso

records

significantprofit

margins.

Nonetheless,

the

price

of

wheat

is

volatile

and

so,

on

1November

20X7,

Gustoso

entered

into

a

contract

with

a

supplier

to

purchase500,000

bushels

of

wheat

in

June

20X8

for

$5

a

bushel.

The

contract

can

besettled

net

in

cash.

Gustoso

has

entered

into

similar

contracts

in

the

past

andhas

always

taken

delivery

of

the

wheat.

By

31

December

20X7

the

price

ofwheat

had

fallen.

The

finance

director

recorded

a

derivative

liability

of

$0·5

million

on

the

statement

of

financial

position

and

a

loss

of

$0·5

million

in

the

statement

of

profit

or

loss.

Wheat

prices

may

rise

again

before

June

20X8.

Theaccountant

is

unsure

if

the

current

accounting

treatment

is

correct

but

feelsuncomfortable

approaching

the

finance

director

again.Pilot

paper

Q2IFRS

9

Financial

Instruments

applies

to

contracts

to

buy

or

sell

anon-financial

item

which

are

settled

net

in

cash.

Such

contracts

areusually

accounted

for

as

derivatives.However,

contracts

which

are

for

an

entity’s

‘own

use’

of

a

non-

financial

asset

are

exempt

from

the

requirements

of

IFRS

9.

Thecontract

will

qualify

as

‘own

use’

because

Gustoso

always

takesdelivery

of

the

wheat.

This

means

that

it

falls

outside

IFRS

9

andso

the

recognition

of

a

derivative

is

incorrect.Answer

-

ContractThe

contract

is

an

executory

contract.

Executory

contracts

arenot

initially

recognised

in

the

financial

statements

unless

theyare

onerous,

in

which

case

a

provision

is

required.

Thisparticular

contract

is

unlikely

to

be

onerous

because

wheatprices

may

rise

again.

Moreover,

the

finished

goods

which

thewheat

forms

a

part

of

will

be

sold

at

a

profit.

As

such,

noprovision

is

required.

The

contract

will

therefore

remainunrecognised

until

Gustoso

takes

delivery

of

the

wheat.The

derivative

liability

should

be

derecognised,

meaning

thatprofits

will

increase

by

$0·5

million.Subsequent

acquisition

of

20%

of

MachWhen

Kutchen

acquired

the

majority

,80%,

shareholding

in

Mach,there

was

an

option

on

the

remaining

20%

non-controlling

interest(NCI),

which

could

be

exercised

at

any

time

up

to

31

March

20X7.On

31

January

20X7,

Kutchen

acquired

the

remaining

NCI

in

Mach.The

payment

for

the

NCI

was

structured

so

that

it

contained

a

fixedinitial

payment

and

a

series

of

contingent

amounts

payable

over

the

following

two

years.Pilot

paper

Q1bThe

contingent

payments

were

to

be

based

on

the

future

profits

of

Mach

up

to

amaximum

amount.

Kutchen

felt

that

the

fixed

initial

payment

was

an

equitytransaction.

Additionally,

Kutchen

was

unsure

as

to

whether

the

contingent

payments

were

either

equity,

financial

liabilities

or

contingent

liabilities.After

a

board

discussion

which

contained

disagreement

as

to

the

accountingtreatment,

Kutchen

is

preparing

to

disclose

the

contingent

payments

inaccordance

with

IAS®

37

Provisions,

Contingent

Liabilities

and

ContingentAssets.

The

disclosure

will

include

the

estimated

timing

of

the

payments

andthe

directors’

estimate

of

the

amounts

to

be

settled.Requirement:

Advise

Kutchen

on

the

difference

between

equity

and

liabilities,

and

on

the

proposed

accounting

treatment

of

the

contingentpayments

on

the

subsequent

acquisition

of

20%

of

Mach.

(8marks)The

Framework

defines

a

liability

as

a

present

obligation,

arisingfrom

past

events

and

there

is

an

expected

outflow

of

economicbenefits.

IAS

32

Financial

Instruments:

Presentation

establishesprinciples

for

presenting

financial

instruments

as

liabilities

orequity.IAS

32

does

not

classify

a

financial

instrument

as

equity

or

financialliability

on

the

basis

of

its

legal

form

but

on

the

substance

of

thetransaction.The

key

feature

of

a

financial

liability

is

that

the

issuer

is

obliged

to

deliver

either

cash

or

another

financial

asset

to

the

holder.

Anobligation

may

arise

from

a

requirement

to

repay

principal

or

interestor

dividends.Answer

1bIn

contrast,

equity

has

a

residual

interest

in

the

entity’s

assets

afterdeducting

all

of

its

liabilities.An

equity

instrument

includes

no

obligation

to

deliver

cash

oranother

financial

asset

to

another

entity.A

contract

which

will

be

settled

by

the

entity

receiving

or

delivering