a) Determine the correct classification of each financial instrument for the year ended 30 June 2023 in Wall's individual financial statements (i.e not consolidated financial statements). Justify your decision using the requirements of IFS 9 Financial Instruments. You are not required to provide specific references.   (2) Assume that financial instruments have been accounted for at fair value through other comprehensive income (FVTOCI). Explain how the balance in the FVTOCI reserve will be accounted for on derecognition of each Investment.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Isaiah , the financial controller at Wall, is reviewing Walls financial instruments to determine their correct classification under IRS 9 Financial Instruments. Isaiah has the following information from the treasury team concerning three financial instruments:

Government bond -

•A bond with a face value of $300,000 and a four-year maturity was acquired on 1 July

• Interest is received at 3% per annum and paid in arrears every six months.

 

Investment in Pharmavax Limited shares-

•25,000 shares In Pharmavax, purchased on 1 July 2022 at a total cost of $550,000.

•The Investment is less than 5% of the issued share capital of Pharmavax.

 

Loan to Ora Limited (Ora)

•During the year, Wall loaned Ora $100,000, interest-free, to fund an upgrade to Ora's inventory system. •The loan Is due to be repaid in three years' time. Wall has a policy of holding all Intragroup loans to maturity.

(a) Determine the correct classification of each financial instrument for the year ended 30 June 2023 in Wall's individual financial statements (i.e not consolidated financial statements). Justify your decision using the requirements of IFS 9 Financial Instruments. You are not required to provide specific references.

 

(2) Assume that financial instruments have been accounted for at fair value through other comprehensive income (FVTOCI). Explain how the balance in the FVTOCI reserve will be accounted for on derecognition of each Investment.

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