Submitted by: Submitted by tete0909
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Category: Business and Industry
Date Submitted: 11/02/2015 05:32 PM
EXERCISE 9-1 (25-30 minutes)
| (a) ASPE | (b) IFRS (IAS 39) | (c) IFRS (IFRS 9) |
1 | Fair value through net income (FV-NI) security since the company’s intent is to manage the changing fair values and sell the bonds as soon as the value increases. Fair value option would be applied. | Fair value through net income (FV-NI) security since this is held for trading. | Fair value through net income (FV-NI) security since the company’s intent is to manage the changing fair values and sell the bonds as soon as the value increases. |
2 | If no active market prices are available for Farm Corp., then at cost; if active market prices are available, then at FV-NI. This will be reassessed if and when a more significant holding is achieved. | There is a choice between FV-NI and FV-OCI here. Management would probably choose the FV-OCI method because of the longer term strategic purpose for this investment. This would be classified as available-for-sale (even though the shares were not acquired for sale!). | Fair value through other comprehensive income (FV-OCI) security. When the company acquires 20% or more, the investment will be reclassified to an equity investment if significant influence over Farm Corp. exists. |
3 | Amortized cost, unless the company chooses the fair value through net income (FV-NI) model option. With such a short maturity, its cost plus accrued interest will be representative of FV in any case. | The fair value through net income (FV-NI) method is the best choice, although the investment’s cost plus accrued interest is representative of its fair value. | The fair value through net income (FV-NI) method is the best choice, although the investment’s cost plus accrued interest is representative of its fair value. |
EXERCISE 9-1 (Continued)
| (a) ASPE | (b) IFRS (IAS 39) | (c) IFRS (IFRS 9) |
4 | Amortized cost should be used unless the intent is to manage them for capital appreciation or trading. If the latter, then...