Avatar Ltd (Avatar) purchased $55,000 of bonds at par. The bonds has been classified as one to be held at fair value through other comprehensive income. At the maturity date, the principal of bonds is redeemed at par when the carrying amount of the bonds is $54,200. Total cumulative losses previously recognized in Avatar’s other comprehensive income in respect of the bonds are $800 before derecognition. Required: In accordance with HKFRS 9 ‘Financial Instruments’, what is the net effect of the disposal of the bonds to be recognized in profit or loss and balance of fair value reserve after derecognition? A. Profit or loss: $0; Fair value reserve: ($1,600) B. Profit or loss: $800 loss; Fair value reserve: $0 C. Profit or loss: $0; Fair value reserve: $0 D. Profit or loss: $800 gain; Fair value reserve: $0
Avatar Ltd (Avatar) purchased $55,000 of bonds at par. The bonds has been classified as one to be held at fair value through other comprehensive income.
At the maturity date, the principal of bonds is redeemed at par when the carrying amount of the bonds is $54,200. Total cumulative losses previously recognized in Avatar’s other comprehensive income in respect of the bonds are $800 before derecognition.
Required: In accordance with HKFRS 9 ‘Financial Instruments’, what is the net effect of the disposal of the bonds to be recognized in profit or loss and balance of fair value reserve after derecognition?
| A. |
Profit or loss: $0; Fair value reserve: ($1,600) |
|
| B. |
Profit or loss: $800 loss; Fair value reserve: $0 |
|
| C. |
Profit or loss: $0; Fair value reserve: $0 |
|
| D. |
Profit or loss: $800 gain; Fair value reserve: $0 |
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