AC2101 S1 2014 Seminar 8 FA.pptx

What is a bonddebenture what is a convertible bond

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Unformatted text preview: cial Assets: Recognition Recognized when enterprise becomes a party to the contractual provisions of the instrument §༊  All primary instruments have to be recognized §༊  All derivatives have to be recognized (FRS 39:14) 14 7 28/8/13 What is a derivative Instrument? A financial instrument or contract with all following 3 characteristics a.  Its value changes in response to a market variable (e.g., interest rate, FI price, commodity price, foreign exchange rate, and price/credit index) b.  It requires no initial net investment or smaller than would be required for other contracts with similar response to market variable changes c.  It is settled at a future date d.  Illustration 2 (FRS 39:9) Illustration 2 – XYZ Ltd (Call Option) 30/11/x1 31/12/x1 30/1/x2 1,000 Call options @ $6/ share Option cost=$500 Share’s MV=$6 B/S date Share’s MV=$7.50 Expiry Share’s MV~ $7.70 Initial recognition Subsequent reporting...
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This document was uploaded on 02/10/2014.

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