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Hello
Why is there no answers provided for the examples in Chapter 18 Financial instruments. I could really use some some help with this subject so any answers would be greatly appreciated.
Regards
at initial recognition financial instruments are measured at fair value through p/l
Then for subsequent measurement the entity has the choice to measure it at amortised cost or keep it at fair value through pl
The amortised cost can be calculated using the effective interest method( i dont know if u have done leasing but its nearly the same)Add the effective interest to the liability and deduct interest paid which will give you the carrying amount.
Also there are instruments which are compound in nature such as convertible bonds where the holder has the option to convert the bond into shares at a predetermined date. So this type of instrument contains both an equity and a liability component. So for presentation purposes , u need to seperate the bond into equity and liability.
This is done by calculating the liability component and then deducting it from the proceeds of the bond which will result in the equity component.Thank you Icedawn thats very helpful. But I am still unsure why no answers are printed for the examples. It would be good to know if I have answered them correctly or rather where I might be going wrong.
Regards
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