Accounting for Financial Liabilities

7/30/2019 Accounting for Financial Liabilities

1/71

Topic 1:Accounting for FinancialLiabilities(MFRS 139)

1


2/71

Objectives

1. To describe long-term liabilities anddescribe how they are valued

2. To identify the nature and types of

long-term liabilities-bond3. To explain the methods of bond

discount and premium amortization

4. To prepare the related journal entries5. To describe the accounting treatment

for other long term liabilities

2


3/71

Long-Term Liabilities

Consists of present obligations not payablewithin the operating cycle of the business, or ayear whichever is longer.

Long-term creditors have no vote inmanagement affairs and only receive a statedrate of interest regardless of the level ofearnings.

Covenants or restrictions, for the protection of

both lenders and borrowers, are stated in thebond indenture or note agreement

Example: Bond payable, Long-term notespayable, Long-term loans, mortgages payable

3


4/71

4

FINANCIAL LIABILITY

MFRS 132 defined as any liability that is:

(a) a contractual obligation:i. to deliver cash or other financial asset to

another entity; orii. to exchange financial assets or financial

liabilities with another entity underconditions that are potentially

unfavourable to the entity; or


5/71

5

FINANCIAL LIABILITY

(b) a contract that will or may be settled in theentitys own equity instruments and is:

i. a non-derivative for which the entity is or may

be obliged to deliver a variable number of theentitys own instrument; or

ii. a derivative that will or may be settled otherthan by the exchange of a fixed amount of

cash or another financial asset for a fixednumber of entitys own equity instrument.

FINANCIAL LIABILITY


6/71

Bonds Payable

Arises from a contract known as a bond indenture.

Represents a promise to pay the principle(face

value) at maturity and periodic interest based on

the stated interest rate and the face value of the

bond

the different types of bonds such as:

term bonds, serial bonds,

secured and unsecured bonds,

registered and coupon bonds. convertible bonds & commodity-backed bonds,

Callable bond

deep discount bonds

Junk bonds(Keiso&Weygandt, 2005; Stice & Stice, 2010(p696))

6


7/71

7

Bonds Payable

Bond contract known as a bond indenture.

Represents a promise to pay:

(1) sum of money at designated maturity date, plus

(2) periodic interest at a specified rate on the maturityamount (face value).

Paper certificate, typically a RM1,000 face value.

Interest payments usually made semiannually.

Purpose is to borrow when the amount of capital needed is

too large for one lender to supply.


8/71

Bursa Malaysia- Bond

Conventional1) Cagamas MBS Berhad

2) Petronas Capital Limited

3) AmBank (M) Berhad

4) Asian Development Bank

8
http://www.bursamalaysia.com/website/bm/market_information/listed_bonds/http://listedbonds.nextview.com/e_list.php?ic=1http://listedbonds.nextview.com/e_list.php?ic=3http://listedbonds.nextview.com/e_list.php?ic=5http://listedbonds.nextview.com/e_list.php?ic=20http://listedbonds.nextview.com/e_list.php?ic=20http://listedbonds.nextview.com/e_list.php?ic=5http://listedbonds.nextview.com/e_list.php?ic=5http://listedbonds.nextview.com/e_list.php?ic=5http://listedbonds.nextview.com/e_list.php?ic=5http://listedbonds.nextview.com/e_list.php?ic=3http://listedbonds.nextview.com/e_list.php?ic=3http://listedbonds.nextview.com/e_list.php?ic=3http://listedbonds.nextview.com/e_list.php?ic=1http://listedbonds.nextview.com/e_list.php?ic=1http://listedbonds.nextview.com/e_list.php?ic=1http://listedbonds.nextview.com/e_list.php?ic=1http://www.bursamalaysia.com/website/bm/market_information/listed_bonds/http://www.bursamalaysia.com/website/bm/market_information/listed_bonds/http://www.bursamalaysia.com/website/bm/market_information/listed_bonds/http://www.bursamalaysia.com/website/bm/market_information/listed_bonds/


9/71

Bursa Malaysia:

Islamic Bond - Sukuk1. Cagamas MBS Berhad

2. Petronas Global Sukuk Ltd.

3. GE Capital Sukuk Ltd.

4. CIMB Islamic Bank Berhad

5. Rafflesia Capital Limited

6. Cherating Capital Ltd.

7. Paka Capital Ltd

8. Khazanah Nasional Berhad

9
http://listedbonds.nextview.com/e_list.php?ic=2http://listedbonds.nextview.com/e_list.php?ic=4http://listedbonds.nextview.com/e_list.php?ic=6http://listedbonds.nextview.com/e_list.php?ic=7http://listedbonds.nextview.com/e_list.php?ic=8http://listedbonds.nextview.com/e_list.php?ic=9http://listedbonds.nextview.com/e_list.php?ic=10http://listedbonds.nextview.com/e_list.php?ic=11http://listedbonds.nextview.com/e_list.php?ic=11http://listedbonds.nextview.com/e_list.php?ic=11http://listedbonds.nextview.com/e_list.php?ic=11http://listedbonds.nextview.com/e_list.php?ic=11http://listedbonds.nextview.com/e_list.php?ic=11http://listedbonds.nextview.com/e_list.php?ic=10http://listedbonds.nextview.com/e_list.php?ic=10http://listedbonds.nextview.com/e_list.php?ic=10http://listedbonds.nextview.com/e_list.php?ic=9http://listedbonds.nextview.com/e_list.php?ic=9http://listedbonds.nextview.com/e_list.php?ic=9http://listedbonds.nextview.com/e_list.php?ic=8http://listedbonds.nextview.com/e_list.php?ic=8http://listedbonds.nextview.com/e_list.php?ic=8http://listedbonds.nextview.com/e_list.php?ic=7http://listedbonds.nextview.com/e_list.php?ic=7http://listedbonds.nextview.com/e_list.php?ic=6http://listedbonds.nextview.com/e_list.php?ic=6http://listedbonds.nextview.com/e_list.php?ic=6http://listedbonds.nextview.com/e_list.php?ic=6http://listedbonds.nextview.com/e_list.php?ic=4http://listedbonds.nextview.com/e_list.php?ic=4http://listedbonds.nextview.com/e_list.php?ic=4http://listedbonds.nextview.com/e_list.php?ic=4http://listedbonds.nextview.com/e_list.php?ic=4http://listedbonds.nextview.com/e_list.php?ic=4http://listedbonds.nextview.com/e_list.php?ic=2http://listedbonds.nextview.com/e_list.php?ic=2http://listedbonds.nextview.com/e_list.php?ic=2http://listedbonds.nextview.com/e_list.php?ic=2


10/71

Accounting forthe Issuance of Bonds

1. The face value of the bond is alwaysreflected in the Bond Payable account.

Dr. Cash xx

Cr. Bond Payable xx

(issue at par)

10


11/71

Accounting forthe Issuance of Bonds (cont.)

2. When a bond sells at a discount, the differencebetween the sales price and the face value isdebited to Discount on Bonds Payable.

This is a contra-account to Bonds Payable.

Dr. Cash xx

Dr. Discount on Bond xx

Cr. Bond Payable xx

11


12/71


3. When a bond sells at a premium, the differencebetween the sales price and the face value iscredited to Premium on Bonds Payable.

This is an adjunct account to Bonds Payable.

Dr. Cash xx

Cr. Bond Payable xxCr. Premium on Bond xx

12


13/71


4. Bonds sold between interest dates:

i. The price includes the interest accruedsince the last interest payment.

ii. The accrued interest is credited to BondInterest Expense.

13


14/71

Example 1:Bonds Payable

CINB Bhd issued RM200,000 of 8% bonds on 1 Jan2010. The bonds are due on 1 Jan 2015, withinterest payable each 1 July and 1 Jan.

Compute the issue price at (as a percentage offace value):

a) 100

b) 97

c) 105

Prepare journal entries for CINB Bhd.

14


15/71

Solution (000):

at 100

(at par)

Dt Cash 200

Kt Bonds Payable 200

at 97(at discount)

Dt Cash 194Dt Disc. bonds 6


at 105

(at premium)

Dt Cash 210


Kt Premium Bonds 10

15


16/71

Issuance of Bonds-Price of bond is based on present value ofbond

Occur when rate employed by buyer is differsfrom stated rate.

Example 2:

RHD Bhd issues RM300,000 of 9% bonds, duein 10 years, with interest payable semiannually.At the time of issue, the market rate for suchbonds is 10%.

Compute the issue price of the bonds.

16


17/71

Valuation of Bonds Payable

A bond's price is equal to the sum of the presentvalue of the principle and the present value of theperiodic interest.

The price of a bond is determined by the

interaction between the bond's stated interestrate and its market rate. If

a) the stated rate = the market rate, sell at par.

b) the stated rate < the market rate, sell at a discount.

c) the stated rate > the market rate, sell at a premium.

Term:

Stated rate = contract rate

Market rate = yield/effective interest rate17


18/71

18

Interest Rates

Stated, coupon, or nominal rate = The interest rate

written in the terms of the bond indenture.Market rate or effective yield = rate that provides an

acceptable return on an investment commensurate with

the issuers risk characteristics.

Rate of interest actually earned by the bondholders.

Valuation of Bonds


19/71

Solution for Example 2:

n = 10 x 2 i = 10%/2

PV of the principal:300,000 x PV

n=20, i=5%

(0.37689) 113,067

PVOA of interest payable:

[(9% x 300,000)/2] x PVAn=20, i=5%

13,500 x 12.46221 168,240

Price of bond 281,307

19


20/71

Amortization ofbond discounts and premiums

Two methods:

1. Effective interest method

is the preferred procedure used to calculate

periodic interest expense. The carryingamount of the bonds at the start of theperiod is multiplied by the effective interestrate to determine the interest expense.

2. Straight-line method may be used if the results are notmaterially different from those produced bythe effective interest method.

20


21/71

Effective interest method

Carrying Value of Bonds = Face Value + Premium ; or= Face Value - Discount

Interest Payable = Stated Rate x Face Value of Bonds

Interest Expense= Effective Rate x Carrying Value ofBonds

If a premium exists:

Dr Interest Expense XX

Dr Premium on Bonds Payable XXCr Interest Payable XX

If a discount exists:Dr Interest Expense XX

Cr Discount on Bonds Payable XX

Cr Interest Payable XX21


22/71

Example 3:Amortization of Bond Premium

BIMD Bhd issued RM600,000 of 10%, 20-yearbonds on 1 Jan 2012, at 102. Interest is payablesemiannually on 1 July and 1 Jan. BIMD Bhd usesstraight-line method of amortization for bondpremium/discount.

Prepare the journal entries to record:

a)The issuance of the bonds

b)The payment of interest on 1 Julyc)The accrual of interest on 31 Dec

22


23/71

Solution for Example 3

a) Issuance of bonds

Dr Cash (600,000 x 1.02) 612,000

Cr Bonds Payable 600,000

Cr Premium on bond 12,000

b) Payment of interest on July 1

Dr Interest expense 29,700

Dr Premium on Bond 300Cr Cash 30,000

23


24/71

Solution for Example 3 (cont.)

c) Accrual interest on 31 Dec


Dr Premium on Bond 300

Cr. Interest payable 30,000

24


25/71

Example 4:Amortization of Discount Bonds

PMB Bhd issued RM600,000 of 10%, 20-year bondson 1 Jan 2012. Interest is payable semiannually on1 July and 1 Jan. PMB Bhd uses effective interest

method of amortization for bond premium/discount.Assume an effective rate yield of 11.5%

Prepare the journal entries to record:

a)The issuance of the bonds

b)The payment of interest on 1 July

c)The accrual of interest on 31 Dec

25


26/71


a) Issuance of bonds

i=11.5/2, n=20x2

PV 600,000 x 0.10685 = 64,110

PVOA 30,000 x 15.5330 = 465,990

Price on 1 Jan = 530,100

Dr Cash 530,100

Dr Discount on bond 69,900

Cr Bonds payable 600,000

26


27/71


Cash Interest

exp.

Amort.

Disc

Balance of

Bonds

530,100

1/7/12 30,000 30,481a 481b 530,581c

1/1/13 30,000 30,508 508 531,089

1/7/13 30,000 30538 538 531,627

a: 11.5% x 530,100 x 6/12 = 30,481

b: 30,481 30,000 = 481

c: 530,100 + 481 = 530,58127


28/71


b) Interest expense on 1 July 2012


Cr. Discount on Bond 481

Cr. Cash 30,000

c) Interest expense on 31 December 2012


Cr Discount on Bond 508

Cr. Interest payable 30,000

28


29/71

Cost of Bonds Issue

The issue of bonds involve numerous costs:

Legal and accounting expense,administrative expense (printingdoc/prospectus), underwriting fees.

These costs do NOT represent an asset

Methods of recognition:

1) As an expense charge to income

statement immediately2) Capitalized & amortized debited to a

deferred charge account & amortize overbond period

29


30/71

Example 5:Cost of Bond Issue

Assume that Cyber Bhd issued a RM40,000,000five-year bond at its par value on 1 January 2012.The bond carries a coupon interest of 10% andinterest is payable on 31 Dec each year. Costs ofissuing the bond, which included underwriting fees,totaled RM1,000,000. The costs were capitalized asa deferred charge and amortized on the straightline method. Show the entries to

(a) record the issue of bond on 1 Jan 2012(b) recognize the amortization of the bond issue

cost and interest expense

30


31/71


a) 1/1/12: to record the issuance of the bondDt Cash 39,000,000

Dt Deferred bond issue cost 1,000,000

Kt Bonds Payable 40,000,000

b) 31/12/12 :

to recognize amortization of deferred charge

Dt Amortization expense 200,000

Kt Deferred bond issue cost 200,000

to recognize interest expense

Dt Interest expense 4,000,000

Kt Cash 4,000,000 31


32/71

32

Bonds Issued between

Interest Dates

When bonds are issued between interest dates,the purchase price is increased by an amountequal to the interest earned on the bonds sincethe last interest payment date.

Buyers will pay the seller the interest accruedfrom the last interest payment date to the dateof issue.

Cash paid by buyer is the price of the bondstogether with the accrued interest.

Price of bonds is the present value of the bond atthe date of issue.


33/71

33

Bonds Issued between

Interest Dates

On the next interest payment date, thebondholder will receives the entire interestpayment.

However, the amount of interest expense to theissuing corporation is the difference between theinterest payment and the amount of interestprepaid by the purchaser.


34/71

Example 6

Date of bond June 30, 2009

Maturity date June 30, 2014

Date of selling the bond Sept 1, 2009

Date of interest payment Dec 31 and June 30

Stated interest rate 9%

Face value of bond RM200,000

Cumi Bhd purchased bond from Ciki Bhd. Thefollowing is the information on the bond.

Prepare journal entries on 1 Sept and 31 Dec

34


35/71


Issued at par:Effective interest rate = 9%

Price of bond at 30/6/2009:

Face value [PV4.5%, 10

200,000 = 0.64393 x 200,000] 128,786

Interest [PVOA4.5%, 10 9,000 = 7.91272 x 9,000] 71,214

Present Value on 30 June 2009 200,000

(+) Increment of bonds value from

30/6 1/9 [200,000 x 9% x 2/12] 3,000

203,000(-) Cash paid for interest from

30/6 1/9 [200,000 x 9% x 2/12] (3,000)

PRICE OF BOND AT 1/9/2009 200,000

35


36/71


Journal entries

Sept 1Dr Cash 203,0001

Cr Interest Payable 3,0002Bonds Payable 200,000

1. 200,000 + 3,000 (interest)2. 200,000 x 9% x 2/12

Dec. 31Dr Interest Payable 3,000

Interest Expense 6,0001Cr Cash 9,000

1. 200,000 x 9% x 4/1236


37/71


Issued at discount:Effective interest rate = 11%

Price of bond at 30/6/2009:

Face value [PV5.5%, 10

200,000 = 0.58543 x 200,000] 117,086

Interest [PVOA5.5%, 10 9,000 = 7.53763 x 9,000] 67,839

Present Value 184,925

(+) Increment of bonds value from

30/6 1/9 [184,925 x 11% x 2/12] 3,390

188,315

(-) Cash paid for interest from

30/6 1/9 [200,000 x 9% x 2/12] (3,000)

PRICE OF BOND at 1/9/2009 185,31537


38/71


Journal entriesSept 1Dr Cash 188,3151

Disc on Bond 14,6852

Cr Interest Payable 3,0003Bonds Payable 200,000

1. 185,315 + 3,000 (interest)2. 200,000 185,315

3. 200,000 x 9% x 2/12

38


39/71


Amortisation of discount schedule

Date CashPaid

InterestExpense

Amortisationof discount

Carryingamount of

bond

30/6/09 - - - 184,925

31/12/09 9,000 10,171 1,171 186,096

30/6/10 9,000 10,235 1,235 187,331

39


40/71


Journal entries

Dec. 31

Dr Interest Expense 6,7811

Interest Payable 3,000

Cr Disc on Bonds 7812

Cash 9,000

1. 10,171 x 4/6

2. 1,171 x 4/6

40


41/71

RETIREMENT OF BONDSBefore the maturity date

Examples of bonds retirement:

1. Refunding

2. Convertible Bond3. Callable Bond

At the maturity date

If bond is retired at the maturity date, no profit orloss is recordedCarrying Amount of Bond = Face Value of Bond

Journal entry for payment made at the maturity date:Dr Bonds Payable XX

Interest expense XXCr Cash XX

Discounts on Bonds Payable XX41


42/71

Refunding

Bond is retired by issuing new bond.

At the retirement, all records on bondsand any related records to the old bond

will be eliminated. Interest expense and amortisation of

discount/premium needs to be recordedin advance until the retirement date.

42


43/71

Example 7

On January 1, 2008, Wira Bhd issuedRM100,000, 10-year bond at par and with statedinterest rate of 5% paid every 30/6 and 31/12.On January 1, 2012, the buyer agreed to receive

bond of RM90,000, 20-year, with stated interestrate of 8% paid at the same dates. Marketinterest rate is 8%.

Prepare journal entries for issuance of bond andrefunding.

43


44/71


At the issuance of the bond:

1/1/08 Dr Cash 100,000

Cr Bonds Payable 100,000

At refunding

Value of new issuance of bond = RM90,000 (at par)

1/1/12 Dr Bonds Payable,5% 100,000

Cr Bonds Payable,8% 90,000Cr Gains from retirement 10,000

44


45/71

Callable Bonds

Normally the bond is repaid at the maturity date.

CAN be repaid at any time if it is called up.

Normally the bond is callable when the market

interest increase due to lower callable price.

At the callable date, the company should record

all interest expense and amortise the

discount/premium until that date.

When the bond is callable, it is retired. Thus, all

record of the bonds and any related to it will be

eliminated.45


46/71

Example 9

On 1 January 2004, Beztax Bhd issued bonds witha par value of RM800,000 at 97, due in 20 years.Bond issue cost totalling RM16,000 were incurred.Eight years after the issuance, the entire issue is

called at 101 and canceled. Discount on bondpayable and bond issue cost are amortized usingstraight-line basis.

46


47/71


Reacquisition price (RM800,000 x 1.01) 808,000

Net carrying amount of bonds redeemed:

Face value 800,000Unamortized discount

24,000 x 12/20 (14,400)

Unamortized issue cost

16,000 x 12/20 (9,600) 776,000

Loss on redemption 32,000

47


48/71


Journal entry:

Bond Payable 800,000

Loss on redemption 32,000

Discount on Bond 14,400Deferred bond issue cost 9,600

Cash 808,000

48


49/71

49

Compound Financial Instruments

Hybrid Securities:

Securities or financial instruments that havecharacteristic of both debt and equity.

They often combine traditional and derivative

financial instruments

Hybrid instruments consist of two parts:

A debt security referred to a (host security)

An option to convert to shares of ordinary shares(embedded derivative)


50/71

50


Are classified by the issuer according to substanceof contractual arrangement and the definition of afinancial liability and an equity instrument.

Their components are classified separately asfinancial liabilities, financial assets or equityinstruments.

Example: Covertible bond payable



51/71

Convertible Bonds

Bonds can be converted into shares

Reasons for conversion:

to increase the equity capital without giving up

more ownership control. to make the bond marketable

Purchased by investors who desire the security of

a bond holding-guaranteed interest-plus theadded option of conversion if the value of theshares appreciates significantly.

51


52/71

Convertible Bonds

Entries for issuing of the bonds

MFRS 132 para 29,require separate recognition of the equity and liability

component

A bond or similar instrument convertible by the holder into

a fixed number of ordinary shares of the entity is acompound financial instrument.

From the perspective of the entity, such an instrument

comprises two components:

a financial liability (a contractual arrangement to delivercash or another financial asset) and

an equity instrument (a call option granting the holder

the right, for a specified period of time, to convert it into

a fixed number of ordinary shares of the entity 52


53/71

Example 8:Converted Bonds

Tania Bhd sold RM500,000 bonds, 8% at 105(RM525,000). Every RM1,000 bond can beexchanged to 1,000 shares of Tania Bhd at anytime after 2 years of bond issued. The is expectedto be sold at the rate of 96 if there is no conversion

privilege.

All bonds are exchanged to shares. Par value ofTania Bhd share is RM1. Half of thediscount/premium has been amortised at the

exchange date.Record the journal entries:

a) On issuance dateb) Exchange date

53


54/71


At issuance date:

Price of bonds without conversion privilege

Face value of bond 500,000

Selling price of bond without conversion privilege 480,000

(0.96 x 500,000) .

Discount on bonds payable 20,000

Price of bond with conversion privilege:

Cash received from the sale of bonds 525,000Selling price without conversion (480,000)

Total can be used for conversion 45,000

54


55/71


At issuance date:

Journal entry:

Dr Cash 525,000Discounts on bonds payable 20,000

Cr Bonds payable 500,000

Premium on shares 45,000

55


56/71

At exchange date:

Dr Bonds payable 500,000

Sharee premium 10,000

Cr Discounts on bonds payable 10,000

Ordinary shares (RM1x500,000) 500,000


56


57/71

Redeemable preference shares

Issued with the condition that the company canbuy back the shares at a specified date in thefuture

The terms of redemption will be stated in the

Articles of Association

If it provide a mandatory redemption or wherethe option of redemption is exercisable by theshareholders SHOULDbe classified as a financial

liability.

57


58/71

58

Redeemable Preference Share withDiscretionary Dividends

Redeemable preference share on whichdividends are non-cumulative and at the discretionof the issuer are compound instruments.

The present value of the redemption value is aliability, the unwinding of the interest is expense,dividends paid relate to the equity are recognised

as distribution of equity.

Oth I t t


59/71

1. Convertible Bonds (CULS)

Debt securities that are exchangeable into ordinary

shares at the option of the holder and under specified

terms and conditions

2. Warrants (Transferable Subscription Rights)

Gives the holder right to subscribe specific number of

shares at the pre-determine exercise price and within aspecified period of time

Other Instrument

for Long Term Liabilities


60/71

3. Irredeemable Convertible Loan Stocks (ICULS)

Quasi-debt pay annual coupon over their tenure butirredeemable in future, means there will be no

repayment of principle at maturity Mandatory converted

Faced value of ICULS will be converted into newordinary shares based on stipulated conversion ratio

Other Instrument

for Long Term Liabilities (cont.)


61/71

On 1 Jan 2008, DRG Bhd issues RM1 million ICULS2008/2012 value at RM1.00 per ICULS. The five-yearICULS paid 7.5% coupon per year. This ICULS can beconverted into ordinary shares based on conversionratio of RM5 ICULS for one new shares (RM1.00, par)

Prepare journal entries at issuance and conversion?

Exercise: ICULS


62/71

At IssuanceDR Cash 1,000,000

CR ICULS1,000,000

At Conversion (maturity date)RM1 million ICULS = # shares?New shares = 1,000,000

5= 200,000 units shares

DR ICULS 1,000,000CR Ordinary shares 200,000CR Premium on shares 800,000

Solution:


63/71

BKAF3063 Financial Accounting & Reporting 3 63

Treatment of interest,dividends, losses and gains

The accounting treatment and presentation ofinterest, dividends, losses and gains depend onwhether the items are related to liability or equity.

If they relate to liability, they should be reported inthe income statement as expense or income suchinterest on bonds

If they relate to equity instrument, they should be

recorded directly to the statement of changes inequity.


64/71


Treatment of interest, dividends,losses and gains

Charges to Income Statement:

Interest on borrowing

Gains or losses associated with redemption orrefinancing of liability are expenses in the incomestatement.

Premiums and discounts on liability are chargedin the income statement.

Dividend on redeemable preference shares is anexpenses to be disclosed in the incomestatement.


65/71


Treatment of interest, dividends,

losses and gains

Changes in equity:

Dividends on equity shares are disclosed in thestatement of changes in equity.

Transaction cost on equity transactions such asregistratin and professional fees, stamp dutiesand printing costs on the issue or share buyback are deducted from equity.


66/71

Purpose: To enhance understanding of the significance offinancial instrument to the entitys financialposition, performance and cash flows.

To assist in assessing the amounts, timing andcertainty of future cash flows associated withthose instruments

Provide information to the extent of risk relatedto financial instrument


Disclosure of FinancialInstruments


67/71

Statement of Financial Position

Categories of financial liabilities (para 8)

The carrying amounts shall be disclosed either on the faceof the balance sheet or in the notes:

e)financial liabilities at fair value through profit or loss,showing separately (i) those designated as such uponinitial recognition and (ii) those classified as held for

trading in accordance with MFRS 139; and

f) financial liabilities measured at amortised cost.

Disclosure of Financial Liabilities


68/71

Statement of Financial Position

Financial liabilities at fair value through profit orloss (para 10)

(a) the amount of change, during the period andcumulatively, in the fair value of the financial liabilitythat is attributable to changes in the credit risk of thatliability

(b) the difference between the financial liability's carrying

amount and the amount the entity would becontractually required to pay at maturity to the holderof the obligation.



69/71

Statement of Comprehensive Income

An entity shall disclose the following items of income,expense, gains or losses either on the face of the financialstatements or in the notes: (para 20)

(a) net gains or net losses on:(i) financial assets or financial liabilities at fair value

through profit or loss, showing separately those onfinancial assets or financial liabilities designated as suchupon initial recognition, and those on financial assets or

financial liabilities that are classified as held for tradingin accordance with MFRS 139;

(v) financial liabilities measured at amortised cost;

Disclosure of Financial Liabilties


70/71

Para 20 (cont..):

(b) total interest income and total interest expense(calculated using the effective interest method)for financial assets or financial liabilities that arenot at fair value through profit or loss;

(c) fee income and expense (other than amountsincluded in determining the effective interestrate) arising from:

(i) financial assets or financial liabilities that arenot at fair value through profit or loss; and



71/71

END OF TOPIC 1

Accounting for Financial Liabilities

Documents

Transcript of Accounting for Financial Liabilities