Ambush, a public limited company, is assessing the impact of implementing the revised IAS 39, Financial Instruments:
Question:
Required:
(a) In a report to the directors of Ambush, outline the following information:
(i) How financial assets and liabilities are measured and classified, briefly setting out the accounting method used for each category. (Hedging relationships can be ignored.)
(ii) Why the 'fair value option' was initially introduced and why it has caused such concern.
(b) Ambush loaned $200 000 to Bromwich on 1 December 2003. The effective and stated interest rate for this loan was 8%. Interest is payable by Bromwich at the end of each year and the loan is repayable on 30 November 2007. At 30 November 2005, the directors of Ambush have heard that Bromwich is in financial difficulties and is undergoing a financial reorganization. The directors feel that it is likely that they will only receive $100 000 on 30 November 2007 and no future interest payment. Interest for the year ended 30 November 2005 had been received. The financial year-end of Ambush is 30 November 2005.
Required:
(i) Outline the requirements of IAS 39 as regards the impairment of financial assets.
(ii) Explain the accounting treatment under IAS 39 of the loan to Bromwich in the financial statements of Ambush for the'year ended 30 November 2005.
Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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Related Book For
International Financial Reporting and Analysis
ISBN: 978-1408075012
5th edition
Authors: David Alexander, Anne Britton, Ann Jorissen
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