IFRS 9

Question 1

Initial measurement of financial instruments

Answer 1

at fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs.

Question 2

Subsequent measurement of financial assets

Answer 2

1. fair value: gains and losses are either recognised entirely in profit or loss, or recognised in other comprehensive income.
2. at amortized cost

Question 3

subsequent measurement of debt instruments

Answer 3

the FVTOCI classification is mandatory for certain assets unless the fair value option is elected

Question 4

subsequent measurement of equity investments

Answer 4

the FVTOCI classification is an election.

Question 5

debt instrument

Answer 5

must be measured at amortised cost (net of any write down for impairment) unless the asset is designated at FVTPL under the fair value option

Question 6

Business model test

Answer 6

The objective of the entity’s business model is to hold the financial asset to collect the contractual cash flows (rather than to sell the instrument prior to its contractual maturity to realise its fair value changes).

Question 7

Cash flow characteristics test

Answer 7

The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Question 8

Subsequent measurement of financial liabilities

Answer 8

FVTPL and amortised cost.
Financial liabilities held for trading are measured at FVTPL, and all other financial liabilities are measured at amortised cost unless the fair value option is applied.

Question 9

Derecognition of financial liabilities

Answer 9

Only derecognise financial liability once contractual obligation is discharged, cancelled or expired

Question 10

Impairment

Answer 10

based on the premise of providing for expected losses.

Question 11

Expected credit losses

Answer 11

required to be measured through a loss allowance at an amount equal to:
1. The 12-month expected credit losses
expected credit losses

2. A loss allowance for full lifetime expected credit losses is required for a financial instrument if the credit risk of that financial instrument has increased significantly since initial recognition

Question 12

independent cases

Answer 12

1. Non-cumulative preferences shares that are not redeemable
2. Cumulative preferences shares that are redeemable in cash
3. Debentures that are redeemable in cash, fixed
4. Debentures that are not redeemable, fixed
5. Compulsory convertible debentures convertible into a fixed number of ordinary shares on a specified date
6. An option granting the right to acquire fixed number of a new issue of shares in a company.