During its financial year ended 31 December 2017, Musonda Holdings, entered into the following transactions described below: In November 2017, having surplus cash available, Musonda Holdings invested in securities of a listed entity on the Lusaka Stock Exchange. The directors intend to sale security in March or April 2018, in order to fund the expansion Musonda Holdings warehouse. Musonda Holdings lend one of its customers, Muchoz, K5,000,000 at a variable interest rate pegged to average bank lending rates. The loan is scheduled for repayment in 2022, and Musonda Holdings has provided an undertaking to Muchoz that it will not assign the loan to a third party. Musonda Holdings added to its portfolio of relatively small investments in the securities of listed companies. Musonda Holdings does not plan to dispose of these investments in the short-term.

Required:

Financial Instruments: Recognition and Measurement

i) Identify the appropriate classification of these three categories of financial asset and briefly explain the reason for each classification.

ii) Explain how the financial assets should be measured in the financial statements of Musonda Holdings at 31 December 2017.

Answer rating: 100% (QA)

Answer As per IAS 39 Financial Assets is any asset that is Cash Equity instrument ofanither enterprise An asset that gives contractual right to receive cash or another financial instrument A contractu... View the full answer