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Financial instruments – financial assets – ACCA Financial Reporting (FR)

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  2. Hello,

    A financial asset why can be measured at the below category options?

    Fair value: what happens with transaction costs if there is? Example?
    Fair value through pl: transaction cost are added to pl. ok? Example?
    Fair value through OCI: what happens with transaction costs?
    Amortized cost: what happens with transaction cost?

    You have not explained each of them with examples and the need for each category in practice.

    What is a transaction cost by the way? would you please provide examples?

  3. I find it a bit difficult to remember in terms of splitting for equity and debt instruments and then remembering possible classifications. And debt instruments can also be classified as FVTPL, which is seeing pretty often in real life.

    Following the two test you’ve mentioned is way easier in my opinion.
    Business model + SPPI
    Held to collect + SPPI passed = Amortised cost
    Held to collect and Sale + SPPI passed = FVTOCI
    all other combinations (just Sale or models above but SPPI failed) = FVTPL

  4. Hi,

    When would you classify a financial asset under the initial recognition as fair value through profit and loss?

    What is the difference between recognize at fair value incl transaction costs versus fair value through profit and loss as per the notes?

    Thank you :-).

    Krgrds,
    Paula.

    • For equity instruments FVTPL is the default classification. The transaction costs are then expensed through profit or loss.

      If it is FVTOCI then the transaction costs are added to the initial FV.

      Thanks

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