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Hi Sir,
1) In the answer to part b of this q, the initial fair value of the financial guarantee was amortised over the 3 year period. My question is, is it a general rule that all financial liabilities measured at FVPL are amortised or is it specific only to financial guarantees?
2)The Q mentioned that discounting was insignificant. My question is, how will the answer differ if discounting was significant and the question stated a discount rate of,say, 10%?
Thank you in advance
Hi,
1) It is part of the standard in relation to financial guarantees but I’d not expect any student to have got this in the exam.
2) If discounting was material then you would have to discount the future payments to present value and then unwind the discount as a finance cost through profit or loss.
Thanks
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