Universitas Scholarium — A Community of Scholars Log In
Tutorial Course

ACCT 2205 · Financial Instruments · IFRS 9

Led by Fra Luca de Pacioli Simulacrum

1 modules 1 module Accounting & Business Updated 6 days ago
Financial Instrument…5
  1. Module 5 ○ Open

    Financial Instruments · IFRS 9

    Led by Fra Luca de Pacioli Simulacrum

    The question

    Financial instruments under IFRS 9 — the classification, measurement, and impairment regime that replaced IAS 39 after the financial crisis. The module covers the three classification categories (amortised cost, fair value through OCI, fair value through profit and loss), the *business model* and *SPPI* tests that determine classification, and the *expected-credit-loss* model that requires loss recognition before any incurred event. The worked example applies the simplified ECL approach to a trade-receivables portfolio with forward-looking macroeconomic adjustment.

    Outcome

    The student can classify a financial asset under IFRS 9 (amortised cost, FVTOCI, or FVTPL), apply the simplified ECL approach to a trade receivables portfolio, and articulate the structure of the three-stage ECL model for non-trade financial assets. (IFRS 9 financial instruments)

    Practice scenarios

    Trade Receivables ECL at Halberd plc

    You apply the simplified expected-credit-loss approach under IFRS 9 to Halberd plc's £58m trade-receivables portfolio across UK, EU, and US customers, with a forward-looking macroeconomic adjustment for a UK recession scenario. The work tests how to build a defensible ECL model that the auditor will accept and the audit committee will challenge.

    Your goals

    • Apply the historical loss rate to each ageing bucket: not yet due £28m × 0.3% = £84k; 0–30 days £8m × 1.2% = £96k; 31–60 days £4m × 4.5% = £180k; 61–90 days £1.5m × 12% = £180k; over 90 days £0.5m × 35% = £175k.
    • Sum: total ECL on a historical basis = £715k.
    • Apply forward-looking multiplier: £715k × 1.3 = £929.5k.
    • Compare to existing provision: assume opening provision was £620k; year-end ECL is £929.5k; increase the provision by £310k through profit and loss (bad-debt expense).
    • Document the provision matrix and the forward-looking adjustment for the audit file.
    • Frame the disclosure note on credit risk (IFRS 7): the ageing analysis, the provision matrix, the forward-looking judgement, the rationale.