PFRS 9: Financial Assets

FINANCIAL INSTRUMENTS

Financial Asset Equity Instrument

Financial Liability

contractual obligation to
any asset that is cash, an any contract that
deliver cash or another
equity of another equity, a financial asset to another
evidences a residual
contractual right to receive entity or to exchange interest in the assets of
cash or another financial financial assets or financial an entity after deducting
asset from another equity liabilities with another all of its liabilities
entity
 EXAMPLES OF
FINANCIAL ASSETS

Investment in shares [<20%]

Equity instrument Investment in associate[20-50%]

Investment in subsidiary[>50%]
FINANCIAL Cash
ASSET trade receivables
to receive cash/ financial asset loan receivables
Contractual right
exchange favorably bonds receivables
Contract to settle with options:
own equity instruments
interest rate swaps
future contracts
forward contracts
 Classification of Financial
Assets

subsequently
measured at

On the basis of both:

A. The entity’s business model
for managing financial assets
Amortized Cost FVOCI FVPL B. The contractual cash flow
characteristics of the financial
a.) if its objectives a.) if its objective is a.) if it does not asset
is to hold financial both collecting meet the
assets in order to contractual cash conditions for the
collect contractual flows and selling amortized cost or
cash flows financial assets FVOCI
classification.
b.) if its b.) if its contractual
contractual terms terms give rise on
give rise on specified dates to
specified dates to cash flows that are
cash flows that are solely payments of
solely payments of principal and
principal and interest
interest
 Recognition

Initial Subsequent
Recognition Recognition

Fair Value through OCI Fair Value through P/L

Amortized Cost (debt &equity
(debt & equity
(debt instruments) instruments)
instruments)

Trade Receivable=
Net Realizable
Value Fair Value= Fair Value=
Fair value + Transaction Cost Loan Receivable= changes will go to Profit/Loss
Amortized Cost OCI
(using effective
interest method)
 Measurement

Initial Subsequent
Recognition Recognition

Fair Value Fair Value Fair Value

Amortized through Other through Profit or
Fair Value
Amortized Cost through Other through
Cost Comprehensive Loss Comprehensive Profit or Loss
Income Income
Fair Value + Fair Value +
Transaction Transaction Fair Value
Cost Cost
 Derecognition

The contractual rights to the cash flows

from the financial asset expire

Derecognition
It transfers the financial asset and the
transfer qualifies for derecognition.

Financial asset is considered transferred to as to

warrant derecognition
when

a. An entity is considered to have transferred a financial asset

b. Even though it enters in a transaction where it retains the

contractual rights to receive the cash flows of the financial asset,
but assumes a contractual obligation to pay the cash flows to one
or more recipients in a particular type of arrangement.
 Reclassification

From Amortized From FVOCI From FVPL

Cost

to to to

To Amortized Cost: To Amortized Cost:

To FVPL:
financial asset is reclassified at
-its fair value is measured at the -its fair value is measured
its fair value at the
reclassification date at the reclassification
reclassification date.
— any gain or loss arising from date becomes its new
-the cumulative gain or loss gross carrying amount
a difference between the
previously recognized in OCI is
previous amortized cost of the
financial asset and fair value is removed from the equity and
recognized in profit or loss adjusted against the fair value of
the financial asset
To FVOCI: To FVPL To FVOCI:
-its fair value is measured at
-financial asset continues to be -financial asset continues to
the reclassification date
-any gain or loss arising from a measured at fair value be measured at fair value
difference between the -The cumulative gain or loss
previous amortized cost of the previously recognized in OCI is
financial asset and fair value is reclassified from equity to profit
recognized in OCI or loss
 Gains and Losses
It is a financial liability designated
It is part of a hedging relationship
as at fair value through profit or
loss

A gain or loss on Financial Assets

measured at Fair Value shall be
recognized in P/L unless:

an investment in an equity instrument It is a financial asset measured at

and the entity has elected to present fair value through the OCI
gains and losses on that investment
in OCI

Presentation of Gains/Losses Recognizing Divident in Financial

Statement

measured at measured at only when

Amortized Cost FVOCI

a. The entity’s right to receive payment of
and which is not part of a shall be recognized in OCI the dividend is established
hedging relationship shall
be recognized in profit or b. It is probable that the economic benefits
Impairment gains or losses
loss when the financial associated with the dividend will flow to the
and foreign exchange gains
asset is derecognized, and losses on such asset entity
reclassified, through shall be presented in profit c. The amount of the dividend can be
amortization process or loss measured reliably
 Impairment

Impairment Requirements

base the measurement of based on a forward-looking model

expected credit losses on that is applied to all financial
historical, current and forecast instruments that are subject to
information impairment accounting

Objectives

to recognize lifetime expected

credit losses for all financial
instruments for which there have
been significant increases in
credit risk since initial recognition