Ch. 19 - Financial Instruments - Complex

Question 1

Convertible Bonds - Initial Measurement

Answer 1

1. Debt recorded as fair value of bond without conversion rights
2. equity recorded as difference b/w cash and debt

Question 2

Convertible Bonds - Subsequent Measurement for:

1. debt
2. equity

Answer 2

1. Debt - amortized cost

2. equity - historical cost

Question 3

Convertible Bonds - Derecognition (maturing)

1. debt
2. equity

Answer 3

1. Debt - paid off as usual

2. Equity - stays in equity

Question 4

Convertible Bonds - Derecognition (converted)

Answer 4

1. include interim interest expense

2. adjust current value of bonds payable and contributed surplus to common shares

Question 5

Convertible Preferred Shares - Initial Measurement

1. at what value
2. how to present

Answer 5

1. included at FV

2. as one share capital account called convertible preferred shares

Question 6

Convertible Preferred Shares - Subsequent Measurement

Answer 6

1. measured at historical cost

Question 7

Convertible Preferred Shares - Derecognition (converted)

Answer 7

1. Derecognize convertible preferred shares

2. Recognize common shares, for the same amount that was derecognized

Question 8

Mandatory Redeemable Preferred Shares means:

Answer 8

the issuer of the shares must redeem the shares on or before a specified date

Question 9

Retractable Preferred Shares means:

Answer 9

the holder of the shares has the right to force the company to repurchase the shares

Question 10

Mandatory Redemption or Retractable Preferred Shares - Initial Measurement

1. At what value
2. How presented

Answer 10

1. Measured at the fair value of the compensation exchanged

2. Shown as a liability

Question 11

Perpetual Debt is:

Answer 11

1. debt that has no requirement to pay back principal, only interest

Question 12

Perpetual Debt - Initial Measurement

1. what amount
2. how presented

Answer 12

1. FV which is present value of interest payments

2. debt

Question 13

Perpetual Debt - Subsequent Measurement

Answer 13

1. measured at amortized cost using effective interest method

Question 14

ASPE - Initial measurement for instruments including debt and equity

Answer 14

1. the entire amount can be shown as debt, or

2. Measure the more determinable component and allocate the remainder to the other

Question 15

ASPE - subsequent measurement of debt

Answer 15

1. allows for use of the straight line method or effective interest method, while IFRS requires effective interest

Question 16

ASPE - mandatory redeemable or retractable preferred shares measurement

1. measured at how much
2. presented how

Answer 16

1/2. if granted in a tax-planning project, can be shown as equity at their par, stated or assigned value

Question 17

ASPE - when mandatory redeemable preferred shares are demanded, how are they presented

Answer 17

1. shown as a liability at redemption amount, with difference to R/E