IFRS 9: Impairment of financial assets – Questions and

Financial instruments questions and answers pdf

Financial instruments questions and answers pdf

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Financial Questions: Trading Instruments

Hi, i got the answer as SOFP 85K, SOPL 65K Gain, SOCI 65k Loss, and this seems to match what the answer is telling us. However, the correct answer is showing as SOFP 85K, SOPL 5K Gain, SOCI Nil. Is this an error?

IFRS 9 – Financial Instruments Quiz - Chartered Education

To conclude, it can be said that the financial instruments are nothing but a piece of document that acts as financial assets to one organization and as a liability for another organization. These can either be in the form of debentures, bonds, cash and cash equivalents, bank deposits, equity shares, preference shares, swaps, forwards and futures, call or notice money, letters of credit, caps and collars, financial guarantees , receivables and payables, loans and borrowings, etc. Each type of financial instrument has its own advantages and disadvantages.

Financial instruments - Pearson Education

Paragraph of IFRS 9 also gives an example of a credit card as an instrument that can be withdrawn by the lender with little notice but that, in practice, exposes the lender to credit risk for a longer period. At any point in time, a portfolio of credit cards is likely to include instruments that have drawn-down amounts and those that do not.

Financial Instrument Definition

The assessment of whether an entity has ‘no reasonable expectations of recovering a financial asset’ should be made at the level of individual financial asset or a portfolio of financial assets, depending on the facts and circumstances, taking into account the nature and credit risk characteristics of the financial assets. For example, it might be appropriate to assess retail mortgage loans on a portfolio level, given that they share similar characteristics, whereas it might be appropriate to assess corporate loans at an individual loan level.

An entity originates a loan of £6,555. The total interest charge over the term of the loan is 75% per annum, payable in quarterly instalments. The borrower has a high credit risk on origination, and the entity expects the borrower to pay late or fail to pay some of the loan instalments.

Yes, the entity needs to recognise a separate impairment loss provision for the loans under IFRS 9, after accounting first for the acquisition under IFRS 8. Paragraph of IFRS 9 has amended IFRS 8 to provide the following guidance: “In the case of a business combination, the acquirer shall not recognise a separate valuation allowance as of the acquisition date for assets acquired in a business combination that are measured at their acquisition-date fair values because the effects of uncertainty about future cash flows are included in the fair value measure”.

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This seems to indicate that, in order for the exception to apply, a facility must have both drawn and undrawn components. However, in many cases, at any point in time, a facility might only have an undrawn component, such as a credit card facility.

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