IFRS 9 Financial Instruments

Question 1

Investment in Equity instruments such as ordinary shares usually measured through Fair Value Through Profit or Loss unless following conditions are applied (measured through FVTOCI)

Answer 1

1. The equity instrument must not be held for trading

2. There must have been an irrevocable choice for this designation upon initial recognition of the asset.

Question 2

Investment in debts (Amortised Cost)

Answer 2

Measured at amortised cost if

1. Business model test - the objective of entity business model is to hold the financial asset to collect contractual cash rather than to sell instrument prior to maturity
2. Cash flows characteristics test - Contractual terms of the financial asset give rise to cash flows that are solely payments of principal and interests

Question 3

Fair Value through other comprehensive income

Answer 3

• The financial asset is held within a business model whose objective by both collecting contractual cash flows and selling financial assets.
• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest

Question 4

FVTPL

Answer 4

Failed in amortised cost and FVTOCI

Question 5

Derecognition of financial assets

Answer 5

1. The contractual rights to receive cash flows has been transferred to the buyer or
2. The entity still retains the contractual rights to receive cash flows but is obligated to pass those cash flows to the buyer under the following conditions:

a. Entity has no obligation to pay amounts to buyer unless it collects equivalent amount on the original asset.
b. Prohibited from selling or pledging the original asset
c. Entity has an obligation to remit those cash flows without material delay.

3. Loss of control