FRS 109: Financial Instruments - A Practical Guide

This highly practical workshop will go through the requirements of FRS 109 in detail (excluding hedge accounting) and will provide many real-life examples on the impact of the standard.

Key Topics

What are financial assets and financial liabilities?

• How are financial assets and financial liabilities recognised initially?
• Treatment of transaction costs
• Accounting for interest-free loans to a subsidiary, employee and a supplier of goods
• Regular way purchases and sales of financial assets
• Trade date and settlement date accounting

Classification of financial assets

• Which financial assets qualify to be measured at amortised cost
• What is amortised cost?
• How is the effective interest rate computed?
• Which financial assets qualify to be measured at fair value through other comprehensive income [FVTOCI]
• How are adjustments for amortised cost and fair value passed?
• Financial asset measureds at fair value through profit or loss [FVTPL]
• Equity instruments - irrevocable choice to measure at FVTOCI

Comprehensive examples explaining how the calculations are derived and accounting entries passed for both shares and bonds for all three classifications

Classification of financial liabilities

• Financial liabilities as subsequently measured at amortised cost
• Financial liabilities measured at fair value through profit or loss

Reclassification of financial assets and liabilities

• The new impairment model
• The new 3-step model for measurement of expected credit losses
• Recognition of expected credit losses for assets measured at FVTOCI
• Simplified approach for trade receivables, contract assets and lease receivables

Examples explaining how the impairment is computed for an impaired receivable, bonds measured at AC and FVTOCI and accounting entries passed thereon