Sbr (int/UK) Strategic Business Reporting

(1 mark) 

 

(Any other valid point: 1 mark) 

 

(Part (b) (i): 3 marks max) 

(ii) Financial 

asset 

According to IFRS 9 Financial instruments, the financial asset should be initially 

recognised at its fair value.  

(1 mark) 

Fair value is defined in IFRS 13 Fair Value Measurement as the price paid when 

selling an asset in an orderly transaction between market participants at the 

measurement date. This amounts to $9 million. 

(1 mark) 

When a financial asset is measured at fair value through other comprehensive 

income, interest income is calculated using the effective rate of interest. This 

amounts to $0.7 million ($9m × 8%). It is credited to profit or loss (as 

investment income) and is added to the carrying amount of the asset.  (1 mark) 

Cash receipts reduce the carrying amount of the financial asset. Prior to 

remeasurement, the financial asset has a carrying amount of $9.3 million ($9m 

+ $0.7m – ($10m × 4%)). 

(1 mark) 

At the reporting date, the asset is remeasured to its fair value of $8.5 million 

and carried at this amount on the statement of financial position. A loss of $0.8 

million ($9.3m – $8.5m) is presented as other comprehensive income. (1 mark) 

The asset’s credit risk has not increased significantly and so a loss allowance 

should be calculated equal to 12 month expected credit losses – i.e. 

$0.2 million. 

 (1 mark) 

The 12 month expected credit losses of $0.2 million are debited to profit or 

loss and credited to other comprehensive income. 

(1 mark) 

The net amount reported in other comprehensive income is therefore 

$0.6 million ($0.8m – $0.2m). This is presented as an amount that may be 

reclassified to profit or loss in the future. (1