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Financial instrument definition. 4cz Lernen beginnen
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'any CONTRACT that give rise | to a FINANCIAL ASSET of one entity | and a financial liability | or equity instrument of another entity'
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Financial asset is any asset that is: 4 Lernen beginnen
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Cash.| Equity instrument of another entity.| Contractual right to receive cash* from another entity.| Contractual right to exchange financial instrument with another entity under conditions that are potentially favourable. CECC *or another financial asset
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Financial liability is any liability 3 definitions: 1-1-2cz Lernen beginnen
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Contractual obligation to deliver cash to another entity. | Contractual obligation to exchange financial instrument with another entity under conditions that are potentially unfavourable.| CCc Contract that will settled in VARIABLE number of the entity's own equity instruments | and is a non-derivative.
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Equity instrument definition: 3cz Lernen beginnen
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'any contract | that evidences a RESIDUAL INTEREST in the assets of an entity | after deducting all of its liabilities'
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If the financial liability will be held at FVtPoL, transaction costs should be... Lernen beginnen
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If the financial LIABILITY will be held at AC or FVtOCI, transaction costs should be... Lernen beginnen
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deducted from its carrying amount.
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The subsequent treatment of a financial LIABILITY is that they can be measured at either: 2 + 2 (use) Lernen beginnen
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AC, | FV-PoL (used for derivatives or liabilities held for trading). Amortised cost is used for most financial liabilities.
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Subsequent treatment of financial liability measured at AC: 4cz Lernen beginnen
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Interest income is calculated using the effective rate. | This is charged to PoL | and increases the CA of the financial liability. | Cash payments at COUPON RATE reduce the liability's CA.
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Subsequent treatment of financial liability measured at FVfPoL: 4cz Lernen beginnen
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Liability is revalued to the FV* | with the gain in PoL.| A designation can be made to use this category in order to reduce an accounting mismatch. The CHANGE in the FV of the liability must be split: The change due to own credit risk is reported in OCI. | The remaining change is reported in PoL.
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Compound financial instrument definition. Lernen beginnen
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Financial instrument that has characteristics of both equity and liabilities. An example would be debt that can be redeemed either in cash or fixed number of equity shares (convertible items).
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IAS 32 requires issuers of compound instruments to split them into: 2 | be precise Lernen beginnen
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Financial liability. | Equity instrument. The liability to repay the debt holder in cash. | The option to convert into shares.
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Convertible debt has two components: 2 Lernen beginnen
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Liability component. | Equity component.
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Calculation of a Liability component of convertible debt. 2cz Lernen beginnen
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PV of the repayments | DISCOUNTED using the rate on non-convertible debt.
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Calculation of a Equity component of convertible debt. 2cz Lernen beginnen
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proceeds received | less the liability component.
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If the financial ASSET will be held at AC or FVtOCI, transaction costs should be... Lernen beginnen
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Investments in equity instruments are normally measured at... equity instruments such as an investment in the ordinary shares of another entity Lernen beginnen
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It is possible to measure an equity instrument at FV-OCI, provided that: 2 | Investments in equity Lernen beginnen
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The equity instrument is NOT held for trading, | And an irrevocable choice for this designation is made upon initial recognition of the asset.
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Investment in equity can be measured: 2 Lernen beginnen
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FV-PoL. | at FV-OCI if investment is NOT held for trade and is irrevocably designated
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Financial assets that are debt instruments can be measured in one of three ways: 3 | Investment in debt Lernen beginnen
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at AC. | at FV-OCI. | at FV-PoL.
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An investment in a Debt Instrument is measured at AC if: 2 | long version Lernen beginnen
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The financial asset is held within a business model whose aim is to collect the contractual CFs. | The contractual terms of the financial asset give rise to CFs that are SOLELY payments of principal and interest on the principal amount outstanding.
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An investment in a debt instrument is measured at FV-OCI if: 2 | long version Lernen beginnen
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The Financial asset is held within a business model whose objective is achieved by BOTH collecting contractual CFs AND selling financial assets. The contractual terms of the financial asset give rise to CFs that are solely payments of principal and interest on the principal amount outstanding.
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An investment in a debt instrument is measured at FV-PoL when: Lernen beginnen
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when other two options* are inappropriate. *At amortised cost and at FV-OCI
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An investment in a debt instrument is measured at AC if: 2 | short version Lernen beginnen
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Contractual CFs characteristics test passed. | Business model is the instrument to hold until maturity.
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An investment in a debt instrument is measured at FV-OCI if: 2 | short version Lernen beginnen
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Contractual CFs characteristics test passed. | Business model involves holding to maturity AND selling.
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The impairment rules in IFRS 9 apply to debt instruments measured at: 2 Lernen beginnen
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For financial assets within the scope of the impairment rules, entities must calculate a... financial asset impairments Lernen beginnen
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Increases and decreases in the loss allowance are charged to... Lernen beginnen
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Loss allowance must equal to: 2cz | 2cz Lernen beginnen
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12 months expected credit losses - if credit risk has NOT increased significantly. | Lifetime expected credit losses - if credit risk has increased significantly.
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3cz Lernen beginnen
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The PRESENT VALUE of the difference | between the contractual CFs due to an entity | and the CFs that it expects to receive.
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Lifetime expected credit losses - definition. 2cz Lernen beginnen
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The expected credit losses | that result from all possible default events.
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12 month expected credit losses - definition. 2cz Lernen beginnen
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The proportion of the lifetime expected credit losses | that arise from default events within 12 months of the reporting date.
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A financial asset should be derecognised if one following has occurred: 1 | 2cz Lernen beginnen
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The contractual rights to the CFs of the financial asset have EXPIRED. || The financial asset has been SOLD | and substantially all the RISKS AND REWARDS of ownership have been transferred to the buyer.
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Financial liability should be derecognised when... 2cz Lernen beginnen
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when the OBLIGATION specified in the contract | is discharged, cancelled or has expired.
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The difference between the CA of the asset or liability and the amount received or paid should be recognised in... The accounting treatment of derecognition 1/3 Lernen beginnen
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For the investments in EQUITY instruments held at FVOCI, the cumulative gains and losses recognised in the OCI are... to PoL on disposal. The accounting treatment of derecognition 2/3 Lernen beginnen
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are NOT RECLASSIFIED to PoL on disposal.
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For investment in DEBT Instruments held at FVOCI, the cumulative gains and losses recognised in OCI are ... to PoL on disposal. The accounting treatment of derecognition 3/3 Lernen beginnen
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ARE RECLASSIFIED to PoL on disposal.
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Derivative is a financial instrument with the following characteristics: 3 Lernen beginnen
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Its value changes in response to an underlying variable. | It requires little or no initial investment. | It is settled at a future date. underlying variable - zmienna bazowa
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Derivatives are measured at... Lernen beginnen
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Derivative is a financial instrument (such as Forward contracts or Options).
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Types of hedge accounting: 2 Lernen beginnen
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'A hedge of the exposure to changes in FV | of a recognised asset or liability | or an unrecognised firm commitment | that is attributable to a particular risk | and could affect PoL* exposure to changes in FV of assets or liabilities | unrecognised firm commitment *or OCI for equity investment measured at FVOCI)'
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5cz Lernen beginnen
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A hedge of the exposure to variability in CFs | that is attributable to particular risk | associated with a recognised asset or liability | or a highly probable forecast transaction (qualified as hedged item) | that could affect PoL.
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Derivatives introduce volatility into PoL. Hedge accounting is a method of managing this by designing one or more hedging instruments so that their change in FV is offset, in whole or in part, by the change in... of a hedged item. 2 Lernen beginnen
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in FV or CFs of a hedged item.
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2 Under IFRS 9, hedge accounting rules can only be applied if the hedging relationship meets the following: 1/4 Lernen beginnen
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eligible hedging instrument | and hedged item.
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At the inception of the hedge, formal documentation identifies: 2 Under IFRS 9, hedge accounting rules can only be applied if the hedging relationship meets the following: 2/4 Lernen beginnen
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eligible hedging instrument | and hedged item. 3 types of hedged items: A recognised asset or liability. | An unrecognised firm commitment – binding agreement for the exchange of a specified quantity of resources.| A highly probable forecast transaction – an uncommitted but anticipated transaction.
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Under IFRS 9, hedge accounting rules can only be applied if the Hedging Relationship is... Lernen beginnen
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If the hedged item is a forecast transaction, then the transaction must be... Under IFRS 9, hedge accounting rules can only be applied if the hedging relationship meets the following: 4/4 Lernen beginnen
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'There is an economic relationship between... A hedging relationship is effective if the following Criteria are met (1/3): Lernen beginnen
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between the hedged item and the hedging instrument' IFRS 9 Financial Instruments
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'The effect of credit risk does not dominate the... 2cz A hedging relationship is effective if the following Criteria are met (2/3): Lernen beginnen
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the value changes | that result from that economic relationship' IFRS 9 Financial Instruments
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'The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the entity actually hedges and the... 2cz A hedging relationship is effective if the following Criteria are met (3/3): Lernen beginnen
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the quantity of the hedging instrument | that the entity actually uses to hedge that quantity of hedged item' Hedge Ratio = Hedge Value ÷ Total Position Value It may be that the hedged item should be designated as 40,000 gallons of oil, with the hedging instrument as 1 futures contract. The other 80,000 gallons of oil would be accounted for in accordance with normal accounting rules
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At reporting date the hedging instrument will be remeasured to... accounting treatment of FV hedge Lernen beginnen
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The CA of the hedged item will be adjusted for the change in FV since... accounting treatment of FV hedge Lernen beginnen
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since the inception of the hedge.
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The gain or loss on the HEDGING instrument and the loss (or gain) on the hedged item will be recorded in [...] but in [...] if... 3 | accounting treatment of FV hedge Lernen beginnen
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In PoL in most cases, | but in OCI if the hedged item is an investment in EQUITY that is measured at FVOCI.
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For the CF hedges, the hedging instrument will be remeasured to ... at... 2 | accounting treatment of CF hedge Lernen beginnen
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to FV at the reporting date. However, if the gain or loss on the hedging instrument since the inception of the hedge is greater that the loss or gain on the hedged item then the EXCESS gain or loss on the instrument must be recognised in PoL.
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If the gain or loss on the hedging instrument since the inception of the hedge is greater that the loss or gain on the hedged item then... Lernen beginnen
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then the EXCESS of gain or loss must be recognised in PoL.
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An entity must cease hedge accounting if any of the following occur: 4+1+1 Lernen beginnen
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the hedging instrument expired or is exercised, sold or terminated. | The hedge no longer meets the hedging criteria. | A forecast future transaction that qualified as hedged item is no longer highly probable. EEST
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The discontinuance of a hedge instrument should be accounted for... Lernen beginnen
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prospectively. Entries posted to date are not reversed.
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IFRS 7 "Financial Instruments: Disclosures" requires that entities disclose: 2 Lernen beginnen
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significance for financial position and performance, | nature and extent of risks arising from financial instruments. Information about the significance of financial instruments for an entity's financial position and performance. | Information about the nature and extent of risks arising from financial instruments.
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Business model test. | Contractual cash flow test. 2 Lernen beginnen
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Intent to hold the asset until its maturity date. | Contractual cash receipts on holding the asset. If the contractual cash flow test is satisfied but there is no intention to hold the asset until maturity then the financial asset is held as FV-OCI.
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