IFRS - INVESTMENTS

Question 1

Under GAAP, a financial instrument can be classified as either trading, AFS, or HTM. How does IFRS differ?

Answer 1

under IFRS, a financial instrument can be classified as FV through PandL or amortized cost.

*comparable to trading vs HTM under GAAP

Question 2

for IFRS: Generally financial assets are measured at FV through PandL. Under what 2 conditions can they be measured at amortized cost?

Answer 2

1. the business model is to hold it until they collect all the cash flows
2. the terms of the instrument calls for cash flows that are exclusively the payments or principal and interest
   * essentially, bonds can be measured at amortized cost

Question 3

if an asset has been deemed as impaired and written down, can it be written back up (reversed/recovered)?

Answer 3

under GAAP, no

under IFRS, yes

Question 4

To what extent can an IFRS asset be recovered?

Answer 4

an asset under IFRS can be recovered only up to what was previously written down

Question 5

IFRS recoveries go to PandL. Where do you classify IFRS appreciated value?

Answer 5

OCI

Question 6

Briefly describe the process of impairment, recovery, and appreciation under IFRS FVTOCI.

Answer 6

When an entity elects FVTOCI:

1. all impairments are recognized through PandL
2. recoveries to the extent of impairment is recognized through PandL
3. appreciation in excess of prior impairment is recognized in OCI