Chapter 11: Financial instruments (IFRS 9)

Financial liabilities. Norma issues 20,000 redeemable debentures at their $100 par value, incurring issue costs of $100,000. The debentures are redeemable at a 5% premium in 4 years' time and carry a coupon rate of 2%. The effective rate on the debenture is 4.58%. Calculate the amounts to be shown in the statement of financial position and statement of profit or loss for each of the four years of the debenture. (Work in $000, rounding each year to the nearest $000.)

Financial liability. Extracts from the trial balance of Noreen Co at 31 December 20X8 are as follows ($000): retained earnings (draft) 1,250 Cr; proceeds of the 4% loan notes 4,000 Cr; interest paid 160 Dr.

Noreen Co issued loan notes with a coupon rate of 4% on 1 January 20X8 at their face value of $4m. $200,000 of direct costs related to the issue were incurred and charged to profit or loss. The loan will be redeemable in five years' time at a substantial premium which gives an effective rate of 7%. The annual interest payments are made on 31 December each year. Prepare extracts from the statement of financial position as at 31 December 20X8, and a schedule of the adjustments to Noreen's draft retained earnings.