Page 533 - F2 Integrated Workbook STUDENT 2019

Answers to supplementary objective test questions

2.4 8.83%

Interest cash flows for cost of debt are calculated post tax.

Interest = 8 × (1– 0.25) = 6

5% 10%
CF DF PV CF DF PV
t0 –93 1 –93 –93 1 –93
t1–3 6 2.723 16.34 6 2.487 14.92

t3 100 0.864 86.40 100 0.751 75.10
NPV 9.74 –2.98

IRR = 5 + (9.74/(9.74 + 2.98)) × (10-5)

k d = 8.83%

CHAPTER 3 – FINANCIAL INSTRUMENTS

3.1 B

As the financial asset is a debt financial asset and is held for trading purposes,
it does not “pass” the business model test (the business model is not to intend
to hold until maturity or to hold some and sell some). As a result, it cannot be
classified as either amortised cost or FVOCI. Therefore, it must be classified as
fair value through profit or loss.

Available for sale (AFS) is a classification used within IAS 39 which has been
superseded by IFRS 9. The AFS category no longer exists under IFRS 9.

3.2 C

Derivative financial instruments will include terms that can be both favourable or
unfavourable (this will determine whether the derivative is a financial asset or
liability).

3.3 D

Forward contracts are an example of derivatives. Derivatives are classified as
FVPL as per IFRS 9. The forward should be revalued to fair value as at the year
end and gains/losses will be taken to the statement of profit or loss.

As the forward was in a gain position of $1m, an asset will be recorded
(classified as FVPL) and the gain is taken to P/L.

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