Title - Debt Investments

TITLE - DEBT INVESTMENTS
I. NATURE Definition of the asset being discussed (debt investment). Use the definition
as may be found in the standard
Debt securities are financial instruments evidencing a creditor relationship with a

company or government. Examples are redeemable preferred stock, corporate
bonds, municipal bonds, U.S. government obligations, convertible debt,
collateralized mortgage obligations, strips, and commercial paper. Debt securities
do not include futures contracts and option contracts.
Debt investments is any security that represents a creditor relationship with an

entity. A debt security has a maturity date and maturity value.
II. What is the recognition principle use? Quote the standard and the principle
RECOGNITION applied.
Initial recognition
“An entity shall recognize a financial asset or a financial liability in its
statement of financial position when, and only when, the entity becomes
party to the contractual provisions of the instrument (see paragraphs B3.1.1
and B3.1.2).”
at initial
recognition, an entity shall measure a financial asset or financial liability at
its fair value plus or minus, in the case of a financial asset or financial
liability not at fair value through profit or loss, transaction costs that are
directly attributable to the acquisition or issue of the financial asset or
financial liability.
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing partie s in an arm's le ngth transaction. [IAS 39.9]
III. How is debt investment measured? List down the different measurement
MEASUREMENT criteria. Illustrations may be used.
A financial asset shall be measured at amortized cost if both of the
following conditions are met:
(a) the financial asset is held within a business model whose objective is
to hold financial assets in order to collect contractual cash flows
and
(b) the contractual terms of the financial asset give rise on specified
dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
A financial asset shall be measured at fair value through other

comprehensive income if both of the following conditions are met:
(a) the financial asset is held within a business model whose objective is
achieved by both collecting contractual cash flows and selling
financial assets and
(b) the contractual terms of the financial asset give rise on specified
dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
A financial asset shall be measured at fair value through profit or loss

unless it is measured at amortised cost in accordance with paragraph 4.1.2
or at fair value through other comprehensive income in accordance with
paragraph 4.1.2A.
Despite paragraphs 4.1.1–4.1.4, an entity may, at initial recognition,

irrevocably designate a financial asset as measured at fair value through
profit or loss if doing so eliminates or significantly reduces a measurement
or recognition inconsistency (sometimes referred to as an ‘accounting
mismatch’) that would otherwise arise from measuring assets or liabilities
or recognising the gains and losses on them on different bases (see
paragraphs B4.1.29–B4.1.32).
IV. Identify the different possible transactions involving the asset. Illustrations
TRANSACTIONS may be used.
Held to maturity
Held for collection and selling
Trading securities
V. How is debt investment presented in the financial statements? Illustration
PRESENTATION may be used. You make present the related accounts affecting the asset.
VI.
DISCLOSURES Summarize the disclosure requirement of this asset as stated in the
standard.
I. NATURE Definition of the asset being discussed (equity investment). Use the
definition as may be found in the standard
Any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
A financial instrument is any contract that gives rise to a financial asset of

one entity and a financial liability or equity instrument of another
instrument.
An equity instrument is any contract that evidences a residual interest of

any assets of an entity after deducting all liabilities.
Equity investments represent ownership interest such as ordinary,

preference or capital shares. It also includes rights to acquire or dispose of
ownership interest in an agreed upon or determinable price, such as in
warrants and rights.
II. RECOGNITION What is the recognition principle use? Quote the standard and the principle
applied.
Initial recognition
“An entity shall recognize a financial asset or a financial liability in its
statement of financial position when, and only when, the entity becomes
party to the contractual provisions of the instrument (see paragraphs B3.1.1
and B3.1.2).”
at initial recognition, an entity shall measure a financial asset or financial

liability at
its fair value plus or minus, in the case of a financial asset or financial
liability not at fair value through profit or loss, transaction costs that are
Directly attributable to the acquisition or issue of the financial asset or
financial liability.
Fair value is the amount for which an asset could be exchanged, or a liability
settled, between knowledgeable, willing parties in an arm's length
transaction. [IAS 39.9]
III. How is equity investment measured? List down the different measurement
MEASUREMENT
Fair value
-Holdings of less than 20%
At cost with periodic adjustment

-Holdings between 20%-50%
Consolidation
-Holdings of more than 50%
IV. Identify the different possible transactions involving the asset. Illustrations
TRANSACTIONS may be used.
Trading/Non-trading
Equity method
Consolidation
V. How is equity investment presented in the financial statements? Illustration

PRESENTATION may be used. You make present the related accounts affecting the asset.
VI. DISCLOSURES
Summarize the disclosure requirement of this asset as stated in the
standard.
EQUITY INVESTMENTS

Title - Debt Investments

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TITLE - DEBT INVESTMENTS

Debt securities are financial instruments evidencing a creditor relationship with a

Debt investments is any security that represents a creditor relationship with an

A financial asset shall be measured at fair value through other

A financial asset shall be measured at fair value through profit or loss

Despite paragraphs 4.1.1–4.1.4, an entity may, at initial recognition,

A financial instrument is any contract that gives rise to a financial asset of

An equity instrument is any contract that evidences a residual interest of

Equity investments represent ownership interest such as ordinary,

at initial recognition, an entity shall measure a financial asset or financial

At cost with periodic adjustment

V. How is equity investment presented in the financial statements? Illustration

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