AC2101 S1 2014 Seminar 8 FA.pptx

Eective interest rate present value computation quoted

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Unformatted text preview: date 8 28/8/13 Financial Assets: Recognition Further, embedded derivatives have to be separately recognized if (i)  economic characteristics and risks of the embedded derivative are not closely related to those of the host contract, (ii)  a separate instrument with same terms as the embedded derivative would meet the definition of a derivative, and (iii) the hybrid (combined) instrument is not “fair value thro P&L” (FRS 39:11) Ø།  Illustration 3 Ø།  What is a BOND/DEBENTURE? Ø།  What is a CONVERTIBLE BOND? Illustration 3 - ABC Ltd (Embedded Derivative) 1/7/x1 31/12/x1 Convertible loan stock $1.5m Plan: AFS Derivative’s MV=$300K Derivative’s MV= $400K Initial recognition Subsequent reporting date This illustration looks at the investment from the INVESTER’S/HOLDER’s perspective. In another seminar titled “Equity”, we’d look at the investment...
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This document was uploaded on 02/10/2014.

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