- This topic has 9 replies, 3 voices, and was last updated 6 years ago by
MikeLittle.
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vuvietquang90
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Dear sir,
I have a terminology need your explaination
“Dexon’a draft statement of FPbas at 31/03/x8 shows financial assets at FV through PL with a CA of $12.5 m as at 01/04/x7
These financial assets are held in a fund whose value changes directly in proportion to a specified market index. At 01/04/x7 the relevant index was 1,200 and at 31/03/x8 it was 1,296
What amount of gain or loss should be recognised at 31/03/x8 in respect of these assets?”Can u explain for me for more details what is “market index” and how it can be applied to this question?
I already read the answer but it didn’t explain anything about it, just do the answer
MikeLittle
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The most obvious “market index” is the index used to measure movements in shares quoted on a stock exchange
Say the stock exchange 350 share index on 1 January 2016 stood at 5400
That indicates that, since the last re-setting of the index to 1000, the shares overall have increased in value such that, if you had invested $1 in every share within the 350 companies, your investment would now be worth $5.40 for each share – an overall value of $1,890
That 5400 index rating on 1 January is now, say, down to 5200 on 1 May.
That indicates that each of your $1 investments (in each of the 350 shares that were, on average, worth $5.40 on 1 January) is now worth only $5.20
In the Dexon question, the financial asset last year was worth (from memory) $10,000 when the index stood at 1200. Since last year the index has moved from 1200 to 1296 and that’s an increase of 8%
The financial asset investment has therefore also risen by 8% = $800 and the accounting entry to reflect that will be:
Dr Financial asset on SoFP $800
Cr Investment income on SoPorL $800Better?
vuvietquang90
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Yes thank u very much sir!!!!
MikeLittle
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You’re welcome
vuvietquang90
- Topics: 36
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In a practice question section, i came across question no.4 and it goes like this
” with reference to the classification and re-classifition of FA being treated as FVTPL & FVTOCI, which of following statement is untrue?
4th choice: re-classification is treated as change in acocunting policy and operated restrospectively”Why this statement is not true?
As my thinking: “change in accounting policy is a change the way of recognition, measurement and presentation in preparing FSs and we do retrospectively adjustment which is going back to the previous period and restating every single components of FSs as if the new policy had always been in place & comparatives too”
In this case i think it was changed in presentation from section P&L to OCI
But the answer wasn’t like that, so can u explain for me why???MikeLittle
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Here’s an extract from the IASPLUS website:
“Reclassification
For financial assets, reclassification is required between FVTPL, FVTOCI and amortised cost, if and only if the entity’s business model objective for its financial assets changes so its previous model assessment would no longer apply. [IFRS 9, paragraph 4.4.1]If reclassification is appropriate, it must be done prospectively from the reclassification date which is defined as the first day of the first reporting period following the change in business model. An entity does not restate any previously recognised gains, losses, or interest.
IFRS 9 does not allow reclassification:
for equity investments measured at FVTOCI, or
where the fair value option has been exercised in any circumstance for a financial assets or financial liability.”
OK?
vimmi
- Topics: 0
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Dear Sir,
Kindly confirm when will you upload the new study material relevant to the new course of F7. I need to apply in coming September and December session 2016.
Thanks
VimmiMikeLittle
- Topics: 26
- Replies: 22654
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First, can you please tell me why this post is in the thread IFRS 9?
This is unfair on students who believe that they are happy with IFRS 9 so don’t look at this thread.
So, Vimmi, I’m going to ask you to repost this on a new thread and I’ll get back to you!
vuvietquang90
- Topics: 36
- Replies: 88
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@mikelittle said:
Here’s an extract from the IASPLUS website:“Reclassification
For financial assets, reclassification is required between FVTPL, FVTOCI and amortised cost, if and only if the entity’s business model objective for its financial assets changes so its previous model assessment would no longer apply. [IFRS 9, paragraph 4.4.1]If reclassification is appropriate, it must be done prospectively from the reclassification date which is defined as the first day of the first reporting period following the change in business model. An entity does not restate any previously recognised gains, losses, or interest.
IFRS 9 does not allow reclassification:
for equity investments measured at FVTOCI, or
where the fair value option has been exercised in any circumstance for a financial assets or financial liability.”
OK?
Thank u very much sir
Im very appreciatedMikeLittle
- Topics: 26
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You’re welcome
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