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Hello Dear Tutor,
Sorry, I have two questions regarding financial instruments:
1 – According to IFRS 9 we should recognise all financial assets and liabilities at FAIR VALUE initially.So why we dont do it for trade receivable and trade payable?
For example when a company sells something at $1000 on credit, the present value of future cashflow for a trade receivable of 1000 becomes 900. so why we dont recognise trade receivable as 900 instead of 1000 and then recognise 100 (difference) as interest income?2-According to this article on ACCA website :
the gain and loss on FVTOCI is NOT reclassified to P&L when the asset is derecognised.
But in paragraph 5.7.10 of IFRS 9 (and also paragraph 55.b IAS 39 about available for sale which is the same as FVTOCI in IFRS 9) it is saying that the gain or loss should be reclassified to P&L!!!!
There is also an example in ACCA website (for IAS 39) that it seems the gain is reclassified : https://www.accaglobal.com/lk/en/member/discover/cpd-articles/corporate-reporting/ias39-instruments.htmlWhich one is correct? We should reclassified the gain to P&L or not??
Thank you with your help in advance
1) We would to, technically, but it’s a rare occurrence that a receivable, when received, will be that much less in present value terms than its face value.
The examiner for P2 wrote an article some time ago wherein he pointed out that,because of the “norm” of receiving debts within a relatively short period, it is impracticable to discount them on the occasion of invoicing to recognise the time value of the debt for the relatively short period taken to collect that debt
2) IAS 39 is not examinable! Follow IFRS 9
OK?
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