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ACCA FR · Guided practice (Show me how)

Chapter 11: Financial instruments (IFRS 9)

Financial assets: fair value through profit or loss and amortised cost

Financial assets. Norman has the following financial assets during the financial year.

1. Norman bought 100,000 shares in a listed entity on 1 November 2015. Each share cost $5 to purchase and a fee of $0.25 per share was paid as commission to a broker. The fair value of each share at 31 December 2015 was $3.50.

3. Norman bought 10,000 debentures at a 2% discount on the par value of $100. The debentures are redeemable in four years' time at a premium of 5%. The coupon rate attached to the debentures is 4%. The effective rate of interest on the debenture is 5.73%.

Financial asset. On 1 January 2020 Norbert purchased a four-year loan note at a discount of 10% to its par value of $10m. The coupon rate attached to the loan note is 3% and the interest is received annually in arrears. Using the amortised cost method of accounting for the loan note yields an effective rate of 6%. Calculate the interest income in the statement of profit or loss for the year ended 31 December 2021. (Work in $000.)

  1. Norman part 1: shares held for trading

    Calculate the initial carrying amount of Norman's trading shares and the remeasurement loss at 31 December 2015.

  2. Norman part 3: debentures held to collect

    Calculate the initial carrying amount of Norman's debentures, interest income for the first year and carrying amount at the end of that year.

  3. Norbert: the second year's interest income

    Calculate the initial carrying amount of Norbert's loan note, its carrying amount at 31 December 2020 and interest income for the year ended 31 December 2021.

Opening this exercise…