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Quiz

ACTG 2P32 Quiz: Hybrid_Instruments

3 Pages
96 Views
Spring 2018

Department
Accounting
Course Code
ACTG 2P32
Professor
Parunchana Pacharn
Study Guide
Quiz

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Hybrid Insatruments
ASPE (sections 3856)
IFRS (IFRS 9, IAS 32,39)
Nature
the issuer of a financial
instrument shall classify the
instrument, or its component
parts, as a liability or as
equity in accordance with
the substance of the
contractual arrangement on
initial recognition and the
definitions of a financial
liability and an equity
instrument.
The issuer of a non-derivative financial
instrument shall evaluate the terms of
the financial instrument to determine
whether it contains both a liability and
an equity component. Such components
shall be classified separately as financial
liabilities, financial assets or equity
instruments in accordance with
paragraph 15
Recognition
The issuer recognizes and
presents the equity
instrument (the exchange
option) separately from the
liability components of the
compound instrument,
whether the liabilities are
financial or non-financial.
A common form of compound financial
instrument is a debt instrument with an
embedded conversion option, such as a
bond convertible into ordinary shares of
the issuer, and without any other
embedded derivative features
Measurement Initial
Acceptable methods for
initial measurement of the
separate liability and equity
elements of an instrument to
which paragraph 3856.21
applies include the following:
(a) The equity component
is measured as zero. The
entire proceeds of the issue
are allocated to the liability
component.
(b) The less easily
measurable component is
allocated the residual
amount after deducting from
the entire proceeds of the
issue the amount separately
determined for the
component that is more
easily measurable.
IFRS 9 deals with the measurement of
financial assets and financial liabilities.
Equity instruments are instruments that
evidence a residual interest in the assets
of an entity after deducting all of its
liabilities. Therefore, when the initial
carrying amount of a compound financial
instrument is allocated to its equity and
liability components, the equity
component is assigned the residual
amount after deducting from the fair
value of the instrument as a whole the
amount separately determined for the
liability component. The value of any
derivative features (such as a call option)
embedded in the compound financial
instrument other than the equity
component (such as an equity conversion
option) is included in the liability
component. The sum of the carrying
amounts assigned to the liability and
equity components on initial recognition
is always equal to the fair value that
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Description
Hybrid Insatruments ASPE (sections 3856) IFRS (IFRS 9, IAS 32,39) Nature the issuer of a financial The issuer of a nonderivative financial instrument shall classify the instrument shall evaluate the terms of instrument, or its component the financial instrument to determine parts, as a liability or as whether it contains both a liability and equity in accordance with an equity component. Such components the substance of the shall be classified separately as financial contractual arrangement on liabilities, financial assets or equity initial recognition and the instruments in accordance with definitions of a financial paragraph 15 liability and an equity instrument. Recognition The issuer recognizes and A common form of compound financial presents the equity instrument is a debt instrument with an instrument (the exchange embedded conversion option, such as a option) separately from the bond convertible into ordinary shares of liability components of the the issuer, and without any other compound instrument, embedded derivative features whether the liabilities are financial or nonfinancial. Measurement Initial Acceptable methods for IFRS 9 deals with the measurement of initial measurement of the financial assets and financial liabilities. separate liability and equity Equity instruments are instruments that elements of an instrument to evidence a residual interest in the assets which paragraph 3856.21 of an entity after deducting all of its applies include the following: liabilities. Therefore, when the initial (a) The equity component carrying amount of a compound financial is measured as zero. The instrument is allocated to its equity and entire proceeds of the issue liability components, the equity are allocated to the liability component is assigned the residual component. amount after deducting from the fair (b) The less easily value of the instrument as a whole the measurable component is amount separately determined for the allocated the residual liability component. The value of any amount after deducting from derivative features (such as a call option) the entire proceeds of the embedded in the compound financial issue the amount separately instrument other than the equity determined for the component (such as an equity conversion component that is more option) is included in the liability easily measurable. component. The sum of the carrying amounts assigned to the liability and equity components on initial recognition is always equal to the fair value that
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