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Hi,
I am referring to Banana (Sep 2018) problem, more specifically, Question 3.
Question can be found here: https://www.accaglobal.com/content/dam/acca/global/PDF-students/acca/SBR/sbrint-2018-sep-q.pdf
Answer is here: https://www.accaglobal.com/content/dam/acca/global/PDF-students/acca/p2/exampapers/int/p2int-2018-sep-a.pdfIn Q3, they say that the bond should continue to be recognised at amortised cost. I just don’t understand the following: “The third party is obliged to pay additional cash to Banana should bond values rise. Banana will also compensate the third party for any devaluation of the bonds.” Since the answer says that the Bond will continue to recognise the bond at AC, how this gain/loss on changes in the fair value of the bond should be accounted for? Gain/loss will be “independent” from the bond and will not affect Balance Sheet?
Thanks,
GigaIn future, please could you post threads with the topic not the question name please.
They are recognising the bond at FVOCI.
Amortised cost will be used to determine the finance cost.
CA AT START OF YEAR
PLUS FINANCE COST CALCULATED USING IRR
MINUS CASH PAID ON COUPON
PLUS OR MINUS GAIN OR LOSS ON REVALUATION TO FAIR VALUE
EQUALS CA AT END OF YEAR
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