Reclasification of F.

A
hoskti hai reclassfication
agar entity apna business management model relating to those specific assets change krle
or ye change already put into effect hogya hai

following are not changes in bmm Reclassfication is acc

intention is related to particular F.A
temporary disapperance of the market for FA
transfer of FA between parts of the entity with different business models

reclassification for equity instrument not allowed

reclassfication for F.L not allowed

investment in debt allowed if conditions met for bmm

following are the cases of change

old class new class transfer value gain/loss extra adjus
A.C FVTPL FV P/L
A.C FVTOCI FV OCI
FVTPL A.C FV -
FVTOCI A.C FV - Previous co
for example

FVTPL FVTOCI FV
FVTOCI FVTPL FV commulativ

Decrecognition of FA

elimination of FA previously recognised in FS

complete disposal
saare shares saare bonds bech di
partial disposal 20000 shares bech rha
one bond I have 100000 bonds@10%
10000@5% for 3 years
principal 10000 500
500 interest
500
1.one stream of identifiable cashflows
either principal or interest ka portion bech den
2.pro rata stream of identifiable c/fs
 90% principal and 90 % interest portion
3.pro rata stream of single identifiable c/f
90% principal or 90% interest
illustration
bond carrying value=10000 we are selling the interest c/fs general en
fv of principal portion=9000 cash received=1190
fv of interest portion=1200
now we will find c.v of interest by this formula
10000*1200/10200=1176

steps in partial disposal

C.V of whole FA
F.V of disposable portion and whole asset
split c.v according to f.v
record entry
continue with the remaining portion

concept of pass through transaction

ek bond hai 10000@2%
ye bond ap ne bech diya magar interest ap receive krrhe or aage 3rd party ko derhe

now you have to prove that asset ap bech chuke hain

is asset ko

paisa ate h

Derecognition of FA interest and principal receive krliya maturity d

2 tareeqe se
1.contractual rights to the c/fs expire
receivable recorded tha cash receive hogae
option exercise krliya
option expire hogya
2.financial asset transfer(bech diya) to another party

access kren g substantial risk and rewards before and after transfe

substantial risk and rewards are transfer substantial risk and rewards retained
transfer qualifies for derecognition transfer not qualified for derecognition
it’s a loan
Cash xxx cash xxx
FA xxx loan xxx
P/L xxx bad debt risk not transferred
unconditional sale of FA sale with repurchase and rep price is above o
bad debts risk not with entity sale with call or put option and option is deep
sale with repurchase but rep price is market price
sale with call or put option and option is deep out of money
Financial Liability accounting mainly ias 32 mai krliya tha

issue of debt instrument bonds,loan notes,debentures,redeemable pref shares

issue of equity instrument ordinary shares,irredemable pref shares

classification

at amortised cost at FVTPL

default category can be opted if there is a accounting mismatc
initial measurement derivatives standing at loss
FV-Cash received xxx initial measurement
Less Issue cost (xxx) FV-Cash received pr measure hoga
xxx Issue cost will be expensed out

subsequent is pr effective interest subsequent measures at fv and any

measurement rate lage ga for interest measurement
calculation & coupon rate
pr interest pay kreng
b/d due to own
interest exp@eff rate OC
interest paid@coupon rate
c/d illustration
fv of debt instrument=pv of future
pehle 10% pr tha ab 13 % rate hog
now market rate 2 cheezo se bnta hai
KIBOR+Credit Worthiness
10% = 8%+2%
 1 year ke baad
rate is 13% 13% = 8%+5%
ab yhan ku ke credit worthiness kh
Derecognition of FL
your obligation in the contract is discharged,expired or cancelled
if it is so then derecognize the FL
FL xxx
Cash xxx
P/L xxx
sometimes modification of the FL also leads to its derecognition
modification(financial liability)
changing the timing of payments of the liability(restructuring)
waiving part of the loan(reducing payable) or combination of both
a/c treatment of modification depends on whether the modified terms of the financial liability is substantially differ

modification

modified term is not su

modified term is substantially different from orignal one same treatment as FA
change is 10% or more carrying value of origna
derecognise the orignal liability pv of modified c/fs at@
and recognise new one at pv of modified c/fs @ Market Rate gain/loss------P/L
any gain/loss will be transferred to P/L
FL(old) xxx
FL(new) xxx
P/L xxx

how will we decide ke substantially different hai ke nahi

pv of orignal c/fs@ orignal eff rate 20
pv of modified c/fs @ orignal eff rate 25

5/20*100 25%
it is substantiall modi

IFRIC 19 Extinguishing FL with equity

FL Clear ki shares issue krke

it does not cover
1.convertable instruments
2.right issues,bonus issue
3.transaction between business under common control
parent
 subsidiary 1 subsidiary 2

equity issued issued must be measured at fv of the equity if reliabily measurable

if not measure at fv of liability
any difference is transferred to P/L

Derivatives,Future Forward Contract

Derivatives
accounting treatment
classified in FVTPL category of Financial Instruments
initial measurement @F.V
Subsequent measurement
F.V &any gain/loss recorded in P/L

no physical transfer of goods/services

net mai settle hota hai gain/loss in P/L

agar kisi contract mai 3 features hon to derivative hai

1.initial investment zero ho
2.khud ki koi value nahi.its value depends on underlying item.
3.future mai settle ho
e.g future or forward contract
swap contracts
option(to buy or sell)
Future/Forward Contracts
contract to buy or sell in future at specified price,specified quantity and specified date specified d

difference between forward and future contract

future contract can be traded in market-----is ke peeeche stock market hoti hai to default pr bhi apko paise mil jaen
standardised contracts hote jis mai quantity and price and timing already decided hoti
forward contract risk of default---kuch nhi milega bcz private arragement
not standardised
apni marzi ki price quantity timing rkh skte
private,over the counter arrangement
Accounting
initial measurement----Nil
subsequent measurement----fair value----gain/loss in P/L
FORMULA FOR FV OF FORWARD/FUTURE
market value of underlying item(from future mkt)-contract price of underlying item
spot rate future rate sb given hoga

standing at gain is FA
standing at loss is FL
in case of contract to buy in case of contract to sell
increase in prices is FA increase in prices is FL
decrease in prices is FL decrease in prices is FA

Derivative is future forward ka fluctuation

Options Right
call option right to buy increase in price is benefit
put option right to sell decrease in price is benefit
 financial asset for option holder/option buyer because agar option buyer ke haq
why?
financial liability for option writer/option providor

initial measurement
FV PREMIUM PAID is the cost for buying the option
Subsequent measurement
FV any gain/loss in P/L
OPTION can be exercised in net and also by issuing or buying share

example solution

option exercise hogyya ya net settle hogya ya option lapse hogya to financial asset reverse hojae ga
Swap Contracts
exchange of stream of c/fs(principal & interest) with another entity
over the counter arragement
intial measurement=NIL
subsequent measurement=FV
any gain/loss recorded in P/L

ek bnde ne MCB se fixed rate 10% pr loan liya(mr A) doosre ne MCB se variable rate(Market rate) p

A ko lag rha ke MR girne wala hai us ne interest c/fs swap krliye B se

Market Interest 12% hogya
mcb mr A se 10% mange ga wo Mr B se lelega
mcb mr B se 12% mange ga or Mr B mr A se lega
Mr A ke perspective se
1.Receive 10% interest from MR B
2.pay 10% interest to MCB
3.pay 12% interest to Mr B

h
count for prospectively

tement

ommulative gain/loss adjusted against carrying value

e 20 ka gain oci mai para tha
OCI 20
FA 20

ve gain/loss transferred to P/L

ye
try
bank 1190
FA 1176
P/L 14

ab jo table mai b/d ayega wo 10000-1176 hoga and effective rate pr interest income book hogi magar
interest received 0 hoga

loan keliye collateral nahi rkhwa skta

i aage transfer krdena h reinvest nahi kr skte agar kiya thore period keliye to interest bhi aage dena h doosri party k

date agae h
er

substantial risk and rewards to be assessed

neither transfer nor retained
if control(who has the ability to sell) is not with you if you have control
derecognise continue to recognise
upto the percentage jis pr apki inv

orignal selling price

p in money

ch in selecting amortised cost

y gain/loss will be divided into 2 categories

due to other risk

n credit risk P/L
CI

c/fs at current market rate

gya to liability kam hogae ek traf liability h doosri traf ham gain record krrhe to a/c mismatch ajae ga
volvment ho