Module 8.2: Investments in Financial Assets (IFRS 9)

Question 1

Debt securities that meet two criteria are accounted for using the amortized cost method.

Answer 1

Business model test
Cash flow characteristic test.

Question 2

Business model test

Answer 2

Debt securities are being held to collect contractual cash flows.

Question 3

Cash flow characteristic test

Answer 3

The contractual cash flows are either principal, or interest on principal, only.

Question 4

Summary of Classifications of Financial Assets

Answer 4

Question 5

Fair Value Through Profit or Loss (for Debt and Equity Securities)

Answer 5

Debt securities may be classified as fair value through profit or loss (FVPL) if held for trading
Equity securities that are held for trading must be classified as FVPL

Question 6

Fair Value Through OCI (for Debt and Equity Securities) (Balance Sheet)

Answer 6

Carried on the balance sheet at fair value and any unrealized gain or loss is reported in OCI.

Question 7

Fair Value Through OCI (Income Statement)

Answer 7

Dividends and interest income

Question 8

Fair Value Through Profit or Loss (for Debt and Equity Securities) (Balance Sheet)

Answer 8

changes in fair value, both realized and unrealized, are recognized in the income statement along with any dividend or interest income.

Question 9

Amortized Cost (Debt Secs) (Balance Sheet)

Answer 9

amortized cost

Question 10

Amortized Cost (Debt Secs) (Income Statement)

Answer 10

Interest income is recognized in the income statement

Question 11

Reclassification Under IFRS 9

Answer 11

Reclassification of equity securities is not permitted

Reclassification of debt securities if the business model has changed.Debt securities that are reclassified out of FVPL as measured at amortized cost are transferred at fair value on the transfer date, and that fair value will become the carrying amount.