A 5% loan note was issued on 1 April 20X0 at its face value of $20 million. Direct costs of the issue were $500,000. The loan note will be redeemed on 31 March 20X3 at a substantial premium. The effective interest rate applicable is 10% per annum.

At what amount will the loan note appear in the statement of financial position as at 31 March 20X2?

Using the drag and drop options below, complete the statement to show how IFRS 9 Financial Instruments require investments in equity instruments to be measured and accounted for (in the absence of any election at initial recognition)?

On 1 January 20X1 Penfold Co purchased a debt instrument at its fair value of $500,000. It had a principal amount of $550,000 and was due to mature in five years. The debt instrument carries fixed interest of 6% paid annually in arrears and has an effective interest rate of 8%. It is held at amortised cost.

At what amount will the debt instrument be shown in the statement of financial position of Penfold Co as at 31 December 20X2?

Which of the following is NOT classified as a financial instrument under IAS 32 Financial Instruments: Presentation?

Dexon Co's draft statement of financial position as at 31 March 20X8 shows financial assets at fair value through profit or loss with a carrying amount of $12.5 million as at 1 April 20X7.

These financial assets are held in a fund whose value changes directly in proportion to a specified market index. At 1 April 20X7 the relevant index was 1,200 and at 31 March 20X8 it was 1,296.

What amount of gain or loss should be recognised at 31 March 20X8 in respect of these assets?

On 1 January 20X8 Zeeper Ltd purchased 40,000 $1 listed equity shares at a price of $3 per share. An irrevocable election was made to recognise the shares at fair value through other comprehensive income. Transaction costs were $3,000. At the year end of 31 December 20X8 the shares were trading at $6 per share.

What amount in respect of these shares will be shown under 'investments in equity instruments' in the statement of financial position of Zeeper Ltd as at 31 December 20X8?

Speculate Co is preparing its financial statements for the year ended 30 September 20X3. The following issues are relevant:

(i) Financial assets Shareholding A – a long-term investment in 10,000 of the equity shares of another company. These shares were acquired on 1 October 20X2 at a cost of $3.50 each. Transaction costs of 1% of the purchase price were incurred. On 30 September 20X3 the fair value of these shares is $4.50 each.

Shareholding B – a short-term speculative investment in 2,000 of the equity shares of another company. These shares were acquired on 1 December 20X2 at a cost of $2.50 each. Transaction costs of 1% of the purchase price were incurred. On 30 September 20X3 the fair value of these shares is $3.00 each.

Where possible, Speculate Co makes an irrevocable election for the fair value movements on financial assets to be reported in other comprehensive income.

(ii) Taxation The existing debit balance on the current tax account of $2.4m represents the over/under provision of the tax liability for the year ended 30 September 20X2. A provision of $28m is required for income tax for the year ended 30 September 20X3. The existing credit balance on the deferred tax account is $2.5m and the provision required at 30 September 20X3 is $4.4m.

(iii) Revenue On 1 October 20X2, Speculate Co sold one of its products for $10 million. As part of the sale agreement, Speculate Co is committed to the ongoing servicing of the product until 30 September 20X5 (ie three years after the sale). The sale value of this service has been included in the selling price of $10 million. The estimated cost to Speculate Co of the servicing is $600,000 per annum and Speculate Co's gross profit margin on this type of servicing is 25%. Ignore discounting.

Which of the following meet the definition of a financial asset in accordance with IFRS 9 Financial Instruments?

(1) An equity instrument of another entity

(2) A contract to exchange financial instruments with another entity under conditions which are potentially favorable

(3) A contract to exchange financial instruments with another entity under conditions which are potentially unfavorable

(4) Cash

Speculate Co is preparing its financial statements for the year ended 30 September 20X3. The following issues are relevant:

(i) Financial assets Shareholding A – a long-term investment in 10,000 of the equity shares of another company. These shares were acquired on 1 October 20X2 at a cost of $3.50 each. Transaction costs of 1% of the purchase price were incurred. On 30 September 20X3 the fair value of these shares is $4.50 each.

Shareholding B – a short-term speculative investment in 2,000 of the equity shares of another company. These shares were acquired on 1 December 20X2 at a cost of $2.50 each. Transaction costs of 1% of the purchase price were incurred. On 30 September 20X3 the fair value of these shares is $3.00 each.

Where possible, Speculate Co makes an irrevocable election for the fair value movements on financial assets to be reported in other comprehensive income.

(ii) Taxation The existing debit balance on the current tax account of $2.4m represents the over/under provision of the tax liability for the year ended 30 September 20X2. A provision of $28m is required for income tax for the year ended 30 September 20X3. The existing credit balance on the deferred tax account is $2.5m and the provision required at 30 September 20X3 is $4.4m.

(iii) Revenue On 1 October 20X2, Speculate Co sold one of its products for $10 million. As part of the sale agreement, Speculate Co is committed to the ongoing servicing of the product until 30 September 20X5 (ie three years after the sale). The sale value of this service has been included in the selling price of $10 million. The estimated cost to Speculate Co of the servicing is $600,000 per annum and Speculate Co's gross profit margin on this type of servicing is 25%. Ignore discounting.

Using the pull down list below, select the correct amount will be included in other comprehensive income for the year ended 30 September 20X3, in respect of the financial assets of Speculate Co.

Speculate Co is preparing its financial statements for the year ended 30 September 20X3. The following issues are relevant:

(i) Financial assets Shareholding A – a long-term investment in 10,000 of the equity shares of another company. These shares were acquired on 1 October 20X2 at a cost of $3.50 each. Transaction costs of 1% of the purchase price were incurred. On 30 September 20X3 the fair value of these shares is $4.50 each.

Shareholding B – a short-term speculative investment in 2,000 of the equity shares of another company. These shares were acquired on 1 December 20X2 at a cost of $2.50 each. Transaction costs of 1% of the purchase price were incurred. On 30 September 20X3 the fair value of these shares is $3.00 each.

Where possible, Speculate Co makes an irrevocable election for the fair value movements on financial assets to be reported in other comprehensive income.

(ii) Taxation The existing debit balance on the current tax account of $2.4m represents the over/under provision of the tax liability for the year ended 30 September 20X2. A provision of $28m is required for income tax for the year ended 30 September 20X3. The existing credit balance on the deferred tax account is $2.5m and the provision required at 30 September 20X3 is $4.4m.

(iii) Revenue On 1 October 20X2, Speculate Co sold one of its products for $10 million. As part of the sale agreement, Speculate Co is committed to the ongoing servicing of the product until 30 September 20X5 (ie three years after the sale). The sale value of this service has been included in the selling price of $10 million. The estimated cost to Speculate Co of the servicing is $600,000 per annum and Speculate Co's gross profit margin on this type of servicing is 25%. Ignore discounting.

What is the total amount which will be charged to the statement of profit or loss for the year ended 30 September 20X3 in respect of taxation?

Speculate Co is preparing its financial statements for the year ended 30 September 20X3. The following issues are relevant:

(i) Financial assets Shareholding A – a long-term investment in 10,000 of the equity shares of another company. These shares were acquired on 1 October 20X2 at a cost of $3.50 each. Transaction costs of 1% of the purchase price were incurred. On 30 September 20X3 the fair value of these shares is $4.50 each.

Shareholding B – a short-term speculative investment in 2,000 of the equity shares of another company. These shares were acquired on 1 December 20X2 at a cost of $2.50 each. Transaction costs of 1% of the purchase price were incurred. On 30 September 20X3 the fair value of these shares is $3.00 each.

Where possible, Speculate Co makes an irrevocable election for the fair value movements on financial assets to be reported in other comprehensive income.

(ii) Taxation The existing debit balance on the current tax account of $2.4m represents the over/under provision of the tax liability for the year ended 30 September 20X2. A provision of $28m is required for income tax for the year ended 30 September 20X3. The existing credit balance on the deferred tax account is $2.5m and the provision required at 30 September 20X3 is $4.4m.

(iii) Revenue On 1 October 20X2, Speculate Co sold one of its products for $10 million. As part of the sale agreement, Speculate Co is committed to the ongoing servicing of the product until 30 September 20X5 (ie three years after the sale). The sale value of this service has been included in the selling price of $10 million. The estimated cost to Speculate Co of the servicing is $600,000 per annum and Speculate Co's gross profit margin on this type of servicing is 25%. Ignore discounting.

What is the amount of deferred income which Speculate Co should recognise in its statement of financial position as at 30 September 20X3 relating to the contract for the supply and servicing of products?

Speculate Co is preparing its financial statements for the year ended 30 September 20X3. The following issues are relevant:

(i) Financial assets Shareholding A – a long-term investment in 10,000 of the equity shares of another company. These shares were acquired on 1 October 20X2 at a cost of $3.50 each. Transaction costs of 1% of the purchase price were incurred. On 30 September 20X3 the fair value of these shares is $4.50 each.

Shareholding B – a short-term speculative investment in 2,000 of the equity shares of another company. These shares were acquired on 1 December 20X2 at a cost of $2.50 each. Transaction costs of 1% of the purchase price were incurred. On 30 September 20X3 the fair value of these shares is $3.00 each.

Where possible, Speculate Co makes an irrevocable election for the fair value movements on financial assets to be reported in other comprehensive income.

(ii) Taxation The existing debit balance on the current tax account of $2.4m represents the over/under provision of the tax liability for the year ended 30 September 20X2. A provision of $28m is required for income tax for the year ended 30 September 20X3. The existing credit balance on the deferred tax account is $2.5m and the provision required at 30 September 20X3 is $4.4m.

(iii) Revenue On 1 October 20X2, Speculate Co sold one of its products for $10 million. As part of the sale agreement, Speculate Co is committed to the ongoing servicing of the product until 30 September 20X5 (ie three years after the sale). The sale value of this service has been included in the selling price of $10 million. The estimated cost to Speculate Co of the servicing is $600,000 per annum and Speculate Co's gross profit margin on this type of servicing is 25%. Ignore discounting.

Which TWO of the following are TRUE in respect of the income which Speculate Co has deferred at 30 September 20X3?

(a) The deferred income will be split evenly between the current and non-current liabilities in Speculate Co's statement of financial position as at 30 September 20X3

(b) The costs associated with the deferred income of Speculate Co should be recognised in the statement of profit or loss at the same time as the revenue is recognised

(c) The deferred income can only be recognised as revenue by Speculate Co when there is a signed written contract of service with its customer

(d) When recognising the revenue associated with the service contract of Speculate Co, the stage of its completion is irrelevant

Vitrion Co issued $2m 6% convertible loan notes on 1 April 20X2. The convertible loan notes are redeemable on 31 March 20X5 at par for cash or can be exchanged for equity shares in Vitrion Co on that date. Similar loan notes without the conversion option carry an interest rate of 9%.

On 1 April 20X3, Vitrion Co purchased 50,000 $1 equity shares in Gowhizzo Co at $4 per share, incurring transaction costs of $4,000. The intention is to hold the shares for trading. By 31 March 20X4 the shares are trading at $7 per share. In addition to the gain on investment, Vitrion Co also received a dividend from Gowhizzo Co during the year to 31 March 20X4.

In accordance with IAS 32 Financial Instruments: Presentation, which of the following describes an equity instrument?

Vitrion Co issued $2m 6% convertible loan notes on 1 April 20X2. The convertible loan notes are redeemable on 31 March 20X5 at par for cash or can be exchanged for equity shares in Vitrion Co on that date. Similar loan notes without the conversion option carry an interest rate of 9%.

On 1 April 20X3, Vitrion Co purchased 50,000 $1 equity shares in Gowhizzo Co at $4 per share, incurring transaction costs of $4,000. The intention is to hold the shares for trading. By 31 March 20X4 the shares are trading at $7 per share. In addition to the gain on investment, Vitrion Co also received a dividend from Gowhizzo Co during the year to 31 March 20X4.

In accordance with IAS 32, how should the issue of the convertible loan notes be recognised in Vitrion Co's financial statements?

Vitrion Co issued $2m 6% convertible loan notes on 1 April 20X2. The convertible loan notes are redeemable on 31 March 20X5 at par for cash or can be exchanged for equity shares in Vitrion Co on that date. Similar loan notes without the conversion option carry an interest rate of 9%.

On 1 April 20X3, Vitrion Co purchased 50,000 $1 equity shares in Gowhizzo Co at $4 per share, incurring transaction costs of $4,000. The intention is to hold the shares for trading. By 31 March 20X4 the shares are trading at $7 per share. In addition to the gain on investment, Vitrion Co also received a dividend from Gowhizzo Co during the year to 31 March 20X4.

What amount in respect of the loan notes will be shown under non-current liabilities in Vitrion Co's statement of financial position as at 1 April 20X2 (to the nearest $'000)?

Vitrion Co issued $2m 6% convertible loan notes on 1 April 20X2. The convertible loan notes are redeemable on 31 March 20X5 at par for cash or can be exchanged for equity shares in Vitrion Co on that date. Similar loan notes without the conversion option carry an interest rate of 9%.

On 1 April 20X3, Vitrion Co purchased 50,000 $1 equity shares in Gowhizzo Co at $4 per share, incurring transaction costs of $4,000. The intention is to hold the shares for trading. By 31 March 20X4 the shares are trading at $7 per share. In addition to the gain on investment, Vitrion Co also received a dividend from Gowhizzo Co during the year to 31 March 20X4.

In accordance with IFRS 9 Financial Instruments, at what amount will the Gowhizzo Co shares be shown under investments in equity instruments in Vitrion Co's statement of financial position as at 31 March 20X4?

Vitrion Co issued $2m 6% convertible loan notes on 1 April 20X2. The convertible loan notes are redeemable on 31 March 20X5 at par for cash or can be exchanged for equity shares in Vitrion Co on that date. Similar loan notes without the conversion option carry an interest rate of 9%.

On 1 April 20X3, Vitrion Co purchased 50,000 $1 equity shares in Gowhizzo Co at $4 per share, incurring transaction costs of $4,000. The intention is to hold the shares for trading. By 31 March 20X4 the shares are trading at $7 per share. In addition to the gain on investment, Vitrion Co also received a dividend from Gowhizzo Co during the year to 31 March 20X4.

Where should the gain on the investment in Gowhizzo Co and its dividend be recognised in Vitrion Co's financial statements for the year ended 31 March 20X4?