Explain how the instrument will be initially and subsequently measured.

(1)

Example 1

(2)

(3)

Example 2

Required:

Explain, with calculations, how this convertible instrument would be initially and subsequently measured in the financial statements of XYZ for the year ended 31 December 2010.

(4)

(5)

(6)

Example 3

Required: Explain how these instruments would be reflected in MNO’s financial statements for the year ended 31 March 2013 in accordance with the following accounting standard: (i) IAS 39 (relevant to CIMA students) (a) Intention to sell shares to make profit => held for trading purposes Classification is therefore ‘Financial assets at fair value through profit and loss’ (b) No intention to sell shares in the short term => ‘Available for sale financial assets’ Measurement: Fair value with changes recognised in other comprehensive

income

(c) Instrument has fixed payments and MNO intend to hold until redemption => ‘Held to maturity financial asset’

(7)

(8)

(9)

(10)

Required: Explain how these instruments would be reflected in MNO’s financial statements for the year ended 31 March 2013 in accordance with the following accounting standard: (ii) IFRS 9 (relevant to ACCA students) (a) Intention to sell shares to make profit => held for trading purposes Classification is therefore ‘Financial assets at fair value through profit and loss’ (b) Amortised conditions not satisfied (no contractual cashflows) => cannot amortise Measurement: Fair value in SFP with changes recognised in P&L (benchmark treatment); or

Other comprehensive income if irrevocable election made (as investment is in equity and not held for trading purposes)

(c) Instrument has fixed payments and MNO intend to hold until redemption => amortised cost conditions are satisfied

(11)

(12)

(13)

(14)

(15)

(16)