Classification of cash flows

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Last update 23/12/2019 Classification of cash flows – IAS 7 10 requires an entity to analyse its cash inflows and outflows into three categories: Operating activities, Investing activities, Financing activities. Topics hide Operating activities Investing activities Financing activities Classification of interest and dividends Classification of cash flows Related posts: Operating activities It is often assumed … Read more

Discount rate

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Last update 13/12/2019 Discount rate – As part of IFRS 13 Fair value measurement the measurement of fair value using the Discounted cash flow model has increased. One of the most influential inputs to a discounted cash flow model is the discount rate/discounting rate. A discount rate is used in different formats in different discounted … Read more

Classification measurement and impairment of financial assets

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Last update 03/12/2019 Classification measurement and impairment of financial assets – IFRS 9 Financial Instruments (IFRS 9) introduced major accounting changes for financial assets that significantly impacted the financial statements of all types of lending organizations, such as banks, financial cooperations, and leasing companies. Here the focus is on classification and measurement – including impairment loss … Read more

Discontinued operation

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Last update 17/11/2019 Discontinued operation – IFRS 5 Definition: A discontinued operation is a component of an entity that either has been disposed of or is classified as held for sale and: Represents a separate major activity or geographical area of operations, Is part of a single coordinated plan to dispose of a separate major activity … Read more

Classification for investments in bonds

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Last update 29/11/2019 Classification for investments in bonds – Under IFRS 9, bonds should be classified and measured based on an entity’s business model for managing the bonds and their contractual cash flow characteristics (SPPI Test) (see table below). The business model refers to how an entity manages bonds in order to generate cash flows—either … Read more

Direct participating contracts

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Last update 13/12/2019 Direct participating contracts – Insurance contracts with direct participation features are insurance contracts that are substantially investment-related service contracts under which an entity promises an investment return based on underlying items.  [IFRS 17 B101] Hence, they are defined as insurance contracts for which: IFRS 17 B101 a) The contractual terms specify that … Read more

Classification and Measurement of Financial Liabilities

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Last update 21/12/2019 Classification and Measurement of Financial Liabilities – The IFRS 9 requirements for the classification and measurement of financial liabilities are substantially unchanged from IAS 39 except for the following: Removal of the cost exception for derivative financial liabilities. Classification and Measurement of Financial Liabilities Changes in fair value as a result of … Read more

Dilution

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Last update 19/12/2019 IAS 33 Definition: Dilution is a reduction in earnings per share or an increase in loss per share resulting from the assumption that convertible instruments are converted, that options or warrants are exercised, or that ordinary shares are issued upon the satisfaction of specified conditions. IAS 33 Definition: Anti-dilution is an increase … Read more

Claims against an entity with different seniorities

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Last update 16/09/2019 The following are a list of distinguished claims against an entity with a short explanation. Some claims take priority over other claims (‘are senior to’), which is also why the liquidation example is used. It also shows different types of equity claims, that also have a hierarchy between themselves regarding their seniority. … Read more

Derivative novation

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Last update 09/12/2019 Derivative novation refers to the replacement of one party to a derivative instrument with a new party, whereby the original party transfers all rights and obligations to the latter party. In some situations, the derivative instrument that is the subject of the novation might be designated as the hedging instrument in a hedging … Read more