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Hi Descy, That's an odd transaction... Why would the funds be transferred to the shareholder/guarantor? It seems that the shareholder got a loan via this entity instead. If that is the case, what you record in the entity is a loan to the shareholder and a borrowing from the bank. In case the entity ...

ehm, not quite

When you buy the put option with a strike price of $12,000 for a premium of, let's say, $120, you book an asset against cash: DR Put option $120; CR Cash $120. Your other entries seem ok. I don't understand your last sentence.

If an option ends out of the money, yes, its value at maturity is zero. The premium you paid in the beginning will have been fully recognised in P/L due to revaluations at each reporting date. In the end there will be no asset left. When an option is out of the money, the market premium (i.e. the op...

Every option has a maturity date. If the option ends out of the money, there will be no value left. As you say, the initial premium will already have been fully recognised in P/L, so there is nothing left for you to do or to account for. As with regard to your previous question, your understanding i...

Yes, I would expect the fee to be amortised over the life of the guarantee

It is a contingent liability under IAS 37. You should disclose it, unless the probability is deemed remote. @JRSB -- this seems to be a performance bond. Banks usually charge a hefty fee to provide this type of guarantees, and should the guarantee be exercised, the bank will have a claim over the en...

I don't understand what you mean by "the option is ‘never’ drawn but only the price change of the own material is absorbed." In any case, let's focus on what happens to the option's value as you approach the expiry date. There are two scenarios: 1 - The option ends in the money: any value ...

What do you mean by "cost of materials"? Do you mean cost of goods sold? If so, that is not correct. If the price of inventory goes down, you can book the gain on the option on the same line item in P&L where you book the NRV write down. If subsequently the price goes up, you will reve...

Ok, so for your highly probale forecast sales you will apply cash flow hedge accounting and the entries are as you've suggested (you book the FV gains or losses of the options in OCI and release it once you recognise the sale). For the remaining inventory you will have a fair value hedge. If the inv...

And what is the risk that you are hedging? Are these commodities on your balance sheet? Or are you hedging future purchases?

what exactly are you hedging?

Hi, Before we get into specifics, what do you mean by "I have a call option 20k$, and I buy it for a premium for 1k$"? If what you mean is that the value of the option is 20k$ at the time you buy it, then that's the option's premium. Premium = option's price. I just want to make sure that ...

For clarity, I would add just one more thing: you need to remeasure the lease liability and the right of use asset as per the modification date (i.e. the date you agree to extend the lease).

Yes, you are correct.

I would agree with the alternative treatment if this was an entity under common control, but that doesn't seem to be the case. This is an associate. I'm not sure if it would be appropriate to consider the waiver as a an increase in the investment in the associate. Also, even if that treatment was ac...

This is a modification and the impact should be taken immediately to P&L. Thus, your suggested entries are correct. However, you need to understand why the investor is waiving interest, because that will have implications going forward on how to determine the expected credit loss on this loan. I...

Hi mchris15,

That will be defined in the contract.

Hi Kieran -- to answer your question, I would take a practical approach here and take those monthly fees straight to P&L.You may want to do a couple of simulations and calculations to prove that the difference is immaterial compared to using the effective interest method.

A loan commitment is indeed the undrawn part of a credit facility. The drawn portion is a financial instrument accounted for under IFRS 9. From experience, and apart from sophisticated banks, most entities amortise transaction costs on a straight line basis as a proxy to the effective interest rate....

A controls B, so in theory it can make B sell it's 70% stake in C to A, unless there are indeed any legal impediments.

Hi Leo,

Your conclusion doesn't make sense. In order to get full control of the group comprising A, B and C, A needs to buy from D the 49% stake in B.

Hi,

If this is equity settled, why would you show it in the cash flow statement? It should be a movement in reserves shown in the SOCIE.

Good reference, Marek. Thanks!!

If you meet all these criteria, it is a cash equivalent: - short-term nature (i.e. readily convertible to a known amount of cash) - subject to insignificant changes in value - the purpose is to meet short-term cash commitments (i.e. it is used for cash management purposes rather than for investment ...

This may require a few discussions between management and auditors, but you can also make the case that the balances in the cash pool are a cash equivalent, as it meets the definition in IAS 7. If you conclude that it does not meet the definition of a cash equivalent, then these are I/C balances, as...

It should be in financial assets at amortised cost. Although 'Trade receivables' is also a financial asset, it is a separate category required by IAS 1.

There is no such thing as "positive provisions" for financial liabilities.

You first need to understand why your creditors are not claiming payment for these trade payables. You can only derecognise them if settled or legally released.

The cheques are merely a payment method. You don't have to disclose them. Similarly, if you have a standing order with a bank (like a direct debit) to make a specific payment every month, you don't have to disclose that either. Your commitment -- the lease liability -- is already recognised and disc...

It should be classified as current because it seems that the entity does not have the right at the end of the reporting period to defer settlement for more than 12 months after the reporting period.

It looks like X controls the account where those funds are deposited. Therefore, X will have to recognise those funds while they are sitting in the 'corporate account'.