Financial liability at fair value through PL

A financial liability ar fair value through profit or loss meets one of the following conditions:

  1. it meets the definition of held for trading.
  2. upon initial recognition it is designated by the entity as at fair value through profit or loss in accordance with IFRS 9 4.2.2 or IFRS 9 4.3.5.
  3. it is designated either upon initial recognition or subsequently as at fair value through profit or loss in accordance with IFRS 9  6.7.1.

So only one of the three criterion is sufficient!


Example:

A debt security that is held for trading is purchased for £8,000.
Transaction costs are £600. The initial carrying amount is £8,000 and the transaction costs of £600 are expensed. This treatment applies because the debt security is classified as held for trading and, therefore, measured at fair value with changes in fair value recognised in profit or loss.

A bond classified as valued at amortised cost is purchased for £10,000 and transaction costs are £1000. The initial carrying amount is £11,000, i.e. the amount paid for the bond and the transaction costs. This treatment applies because the bond is not measured at fair value with changes in fair value recognised in profit or loss. Using the effective interest rate method interest expenses are recorded in profit or loss (i.e. the transaction costs are included in interest expense).

Reclassification of financial liabilities An entity shall not reclassify any financial liability.

Derecognition of financial liabilities An entity shall remove a financial liability (or a part of a financial liability) from its statement of financial position when, and only when, it is extinguished—i.e. when the obligation specified in the contract is discharged or cancelled or expires.
An exchange between an existing borrower and lender of debt instruments with substantially different terms shall be accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability.
Similarly, a substantial modification of the terms of an existing financial liability or a part of it (whether or not attributable to the financial difficulty of the debtor) shall be accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability.
The difference between the carrying amount of a financial liability (or part of a financial liability) extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, shall be recognised in profit or loss.

Financial liability at fair value through PL

Financial liability at fair value through PL

Financial liability at fair value through PL Financial liability at fair value through PL Financial liability at fair value through PL Financial liability at fair value through PL

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