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ACCAglobal Accountant杂志-2012年七月刊第六讲
ACCA Student Accountant magazine archive July 2012
What is a financial instrument? Part 2
My previous article covered the classification, initial measurement and subsequentmeasurement of financial liabilities (eg loans and bonds) and issued equityinstruments (eg ordinary shares). It was established that when issuing financialinstruments to raise finance, the issuer had to classify instrument as either financialliabilities (and, in turn, financial liabilities were split into amortised cost and FairValue Through Profit or Loss (FVTPL)) or equity instruments. This can be summarisedin the following diagram.
Issuing financialinstruments(raising finance)
Financial liabilities Equity instruments
Contain an
obligation
to repay
Evidence of an
ownership interest in
the residual net
assets
If classified as
amortised cost;
initial measurement
is at fair value less
issue costs and then
subsequent
measurement is at
amortised cost
If classified as FVTPL;
initial measurement is
at fair value, and then
so is subsequent
measurement with
gains and losses being
recognised in the
income statement
Initial measurement
is at fair value less
issue costs and,
subsequently, no
change as equity
instruments are not
re-measured
Accounting for compound financial instrumentsWhile the vast majority of financial instruments create a financial asset in one entity
and a financial liability or equity instrument in the accounts of another entity, it ispossible that a single financial instrument can create a financial asset in one entityand a financial liability and an equity instrument in another entity. The classicexample of this arises when an entity issues a convertible bond.Accounting for the issue of convertible bonds (debt and equity in a singleinstrument)
Convertible bonds are basically debt instruments but they also contain an option toconvert into equity shares and this means that a convertible bond contains both debt
and equity elements. The option to convert into equity is strictly a derivative that isembedded into the host contract. The option will be exercisable by the holder of thebond who has the option to require settlement of the debt in equity shares rather than
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