Financial Instruments Flashcards
Classification of financial liabilities
Amortized cost or fv through pl.
Financial assets loss allowance
Only for assets at fv oci and amortized.
If asset not credit impaired, recognize loss allowance but do not adjust the rate.
If asset becomes credit impaired after purchase. Do not adjust the rate, calculate pv using new amounts expected and get the pv using the old rate. The difference between the new pv and the ca of the amortized will be the loss allowance.
Create a schedule using gross amount, loss allowance and amortized cost. Gross amount would be ca of amort. Loss allowance would be new pv using old rate less old ca. Amortized would be gross plus loss.
Change in gross would be gross balance x old i less amount received. Loss change would be balance of loss times i.
Loss would be recorded and changes as well, interest would be recorded using new amt and old rate, change in gross would go to the asset.
If credit impaired on acquisition.
Determine the rate using new amounts. Get pv using old amounts and new rate. Record at pv. Difference between pv calculated would be the credit loss allowance, same as above.
Reclassify of financial assets
Amortized to pl fv. Loss not restated, gain go to pl.
Amortized to fv oci. Loss not restated gain in oci.
Fv oci to amortized. Amount in fv reserve will be set of against the ca thus it would be at same ca as if always amortized. Loss allowance will also set off to the asset.
Fv oci to fv pl. fv reserve would be transferred to profit. Loss allowance oci would be transferred to the sofp.
Fv pl to fv oci.
Fv pl to amortized. Fv would be the current starting point.
Hedges. Cf hedge
G and l go to oci of the item and the instrument. Ineffective portion goes to pl. Ineffective portion would be the difference between the item change and the hedge change to extent more than item change.
Realized portion of cf hedging non financial assets included in ca when assets recorded. If Financial assets, cf reserve would be transferred to pl when cf included in income of the item.
Fv hedge
G and l of item and hedge included in pl even if designated through oci, unless equity designated through oci where it will be item and hedge through oci. Firm commitment unless firm commitment in foreign currency in which case can be either cf or fv.
Financial asset classification
Amortized if held in business model to collect contractual cf, and receipts are only principle and interest.
Fv through oci. Only if held for contractual cf and sale, and principle and interest receipts. Cannot be held for trading. Interest would still go through pl as usual using determined rate. The difference between ca and fv using market rate would go to oci.
Rest fv profit or Loss. No split between fv and interest as everything goes to pl.
Can initially designate through fv through pl.
Can designate equity instruments initially through oci.
