IFRS 9.
2
MEASUREMENT OF FINANCIAL INSTRUMENTS
EXAMPLE 1
Share investment in Peat Limited
The investment is classified as measured at fair value through profit or loss. On
1 March 20.6, Share Limited bought 60 000 ordinary shares in Peat Limited at a market
price of R13.50 per share. Transaction costs of 2% were incurred on the same date.
On 31 December 20.6, the shares in Peat Limited were traded at R14.15 per share.
These shares are sold on 5 January 20.7 at a fair value of R15.00 per share for cash.
Ignore the effect of taxation.
REQUIRED:
a) Prepare all the journal entries for the transactions in respect of the investment from
1 March 20.6 to 5 January 20.7 in the accounting records of Share Limited.
EXAMPLE 2
Loan granted to Mr Smart
On 2 January 20.6, Fast Limited granted a loan of R200 000 to one of its senior
employees, Mr Smart. This loan carries no interest and is repayable in full on
31 December 20.7. On 2 January 20.6, a cheque for R200 000 was made out in favour
of the employee when a fair interest rate of 13% per annum on similar loans could
have been negotiated. Assume for this example that 13% is an observable interest
rate.
Ignore the effect of taxation.
REQUIRED:
a) Prepare all the journal entries for the transactions in respect of the loan from
2 January 20.6 to 31 December 20.6 in the accounting records of Fast Limited.
EXAMPLE 3
Share investment in listed company
Company A acquired 10 000 ordinary shares in a listed company on
1 November 20.13. It elected to classify the instrument as measured at fair value
through other comprehensive income. The shares were purchased at a fair value of
R2,00 per share. Transaction costs of 5% were incurred on the same date. The market
value of the shares at year-end (31 December 20.13) is R5,00 per share. These shares
are sold on 2 January 20.14 at a fair value of R5,10 per share for cash. The accounting
policy of the company is to transfer the cumulative balance on the mark-to-market
reserve to retained earnings when the asset is derecognised.
Ignore the effect of taxation.
REQUIRED:
a) Prepare all the journal entries for the transactions in respect of the investment from
1 November 20.13 to 2 January 20.14 in the accounting records of Company A.
EXAMPLE 4
Corporate bonds investment
Star Ltd acquired, for cash, 800 R100 11% per annum corporate bonds on
1 January 20.12 at their fair value of R72 000. Transaction costs of R1 000 were
incurred. The bonds pay interest annually on 31 December, and the capital is settled
at maturity on 31 December 20.14. Star Ltd has a financial year end of 31 December.
This financial instrument qualifies to be measured at amortised cost.
Ignore the effect of taxation.
REQUIRED:
a) Prepare the amortisation table for the entire period.
b) Prepare all the journal entries for the transactions in respect of the investment from
1 January 20.12 to 31 December 20.13 in the accounting records of Star Ltd.
