Page 415 - F2 Integrated Workbook STUDENT 2019

Answers

Example 3.8

An acquisition of debentures represents a DEBT financial asset.

Lucas’ business model is to hold the bond until maturity. This would pass the
business model test and should be classified as amortised cost.

Initial recognition would be at fair value plus transaction costs. Subsequent
treatment is at amortised cost.

Statement of profit or loss and other comprehensive income (SOPLOCI)

Year 20X1 20X2

$ $
Finance income 1,400 1,456

Statement of financial position (SFP)

Year 20X1 20X2

$ $
Non-current assets
Financial assets 10,400 10,856

(W1) Amortised cost table

Year Opening balance Effective Coupon Closing balance
($) interest received (SFP)
14% (P/L) 10% ($)

1 10,000 1,400 (1,000) 10,400
2 10,400 1,456 (1,000) 10,856

Note: Effective interest rate is multiplied by opening balance.

Note: Coupon rate is multiplied by par value of the investment.

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