week 6&7 - financial assets

what are the two ways to group equity financial assets based on concept of influence

strategic, non strategic

what is the difference between strategic and non strategic assets?

non strategic assets do not influence financial decisions

what are the 3 ways to group financial assets based on nature

equity, derivative, debt

what are the three kinds of strategic equity financial assets

no significant influence, significant influence, control

what is the percentage of voting rights for equity assets with no significant influence?

0 - 20%

what is the percentage of voting rights for equity assets with significant influence?

20 - 50%

what is the percentage of voting rights for equity assets with control?

50 - 100%

what method do you use under IFRS for equity assets with no significant influence

FVPL

what method do you use under IFRS for equity assets with significant influence

equity method

what method do you use under ASPE for equity assets with significant influence

cost method

what are the steps when recording A/R as a financial asset

initial recognition, measurement, impairment, derecognition

What is the JE for the initial rec of an investment under equity method?

DR Investment in associate
CR cash

what is the JE for receiving interest income under equity method?

DR Investment in associate
CR investment income (NI)

what is the JE for receiving dividends under the equity method?

DR Cash

CR Investment in associate

what is the JE if the company invested in has a net loss on year end under equity method?

DR Investment loss (NI)

CR Investment in associate

what is the criteria to classify a non strategic debt financial asset using amortized cost method?

the objective is to hold asset to collect contractual cash flows of payments of principal and interest

what is the criteria to classify a non strategic financial asset using FVOCI method?

the objective is to collect contractual cash flows of payments of principal and interest and sell the asset

what are the only 2 classification options for a strategic equity investment with no significant influence?

FVPL, OCI election

what is recognized in NI under FVPL?

transaction costs, holding gains/losses, derecognition gains/losses, dividends

what is FVPL under ASPE if it is an active market

FVNI

when is OCI election method used for a non strategic equity investment?

make an irrevocable election at initial recognition and it is not held for trading

what are dividends measured under in an OCI election?

Net income

what is the JE under FVPL for a no significance equity investment at initial recognition?

DR FVPL investment

DR Transaction costs (NI)

CR cash

what is the JE under FVPL for a no significance equity investment when dividends are recieved?

DR cash

CR Dividend income (NI)

what is the JE under FVPL for a no significance equity investment if there is a holding gain at year end?

DR FVPL investment

CR holding gain FVPL investment (NI)

what is the JE under OCI election for a no significance equity investment at initial recognition?

DR equity investment OCI election

CR cash

what is the JE under OCI election for a no significance equity investment if there is a holding gain at year end?

DR equity investment OCI election

CR holding gain equity OCI election (OCI)

what is the JE under OCI election for a reclass option

DR accumulated OCI

CR retained earnings

what is the total used under OCI election for reclass JE

sum of gains

for debt financial assets, which is the only classification that is not initially recorded at PV of future cash flows?

FVPL

what is the JE for initial recognition for debt asset using amortized cost method?

DR amortized cost bond investment
CR cash

what is the JE for receiving interest for debt asset that is at a discount using amortized cost method?

DR cash
DR amortized cost bond investment
CR interest income (NI)

what is the JE for initial recognition for debt asset using FVOCI method?

DR FVOCI bond
CR cash

what is the JE for a holding gain for a debt asset using FVOCI method?

DR FVOCI bond
CR holding gain FVOCI (OCI)

what is the JE for FVOCI reclass/recycling a holding gain for debt asset?

DR Cash
DR reclassify holding gain (OCI)
CR FVOCI bond investment
CR gain on sale FVOCI investment (NI)

what impairment model is used under ASPE

incurred loss model

what impairment model is used under IFRS

expected loss model

with classification methods use the expected loss model?

amortized cost, FVOCI

what do you do if there is a significant increase in credit risk under the expected loss model?

measure loss allowance at the lifetime expected credit losses

what do you do if there is not a significant increase in credit risk under the expected loss model?

measure loss allowance at 12 month of expected credit losses