IFRS 9

Question 1

The Polyact co purchased $60,000 of shares, which are classified as HFT. One year later, co sold 50% of the shares for $40,000.

Req: What is the amount of G/L on disposal to be recog in P/L?

Answer 1

purchased shares (IIE)
HFT (fail BMT + CCT) = FVTPL
CV = 50% x $60,000 = $30,000 vs $40,000
G = $10,000

On derecognition, the diff between the CV and consd recv (proceeds of sale) will recog in P/L.
On the assumption, asset was not remeasured, gain of $10,000 is to be recog in SOPL.

Dr bank 40k
Cr finl A 30k
Cr SOPL 10k

Remaining $30,000 portion retained will cotinue to be recog as Finl Asset. No G/L

Question 2

Debt factoring (no recourse), how to account? SOF

Answer 2

Genuine sale (Yes) - trsf R,R
In future, if the recv do not pay -> factor cannot take action upon entity

Shd derecognise FA
dr bank
dr fc SOPL
cr FA

Question 3

Debt factoring (FULL recourse), how to account?

Answer 3

Genuine sale (No) - Retain Risk - still has right to recv cash from factor
In future, if the recv do not pay -> factor can take action

-Shd continue recognising recv
-cash to pay/ oblg = meet defn of finl liab
dr bank
cr finl liab

SOFP
dr recv
cr finl lian (ACM)
CANNOT OFFSET

Question 4

FGC (retain oblg) on debt factoring gives ….. …….
and has to recog separate …. …. … … … .. ….
bcs substantial ….. ……. Finl Liab shd recog at …. …..

Answer 4

1 - limited liability
2 - finl liab up to probability of default
3 - risk is retained
4 - fair value (IFRS 13) - PV @ disc rate related party/ non-related party/ subsq FVTPL

Question 5

If derecognised trade recv, what should you be telling the examiner?

Answer 5

-no further right to recv cash from factor
-R&R of ownership of recv have been substantially transferred
-no further control over trade recv