Accounting and reporting of financial instruments is on of important topic of CA-Final's subject "Financial Report." Accounting and reporting of financial instrument also include in IFRS 9 phase 1 (Part 1). According to this, "Financial instrument will show in the books at fair value. All debt securities, securitized instrument, bonds, commercial papers and municipal securities will be financial instruments."
Accounting Treatment of Financial Instruments
(A) Recording of Buying and Selling Value of Financial Instruments
Students should understand that which value should investor or issuer of financial instruments record in his books? Value will not be original cost but it will be fair market value and its information will be find from stock exchange or money market. For example on the date of recording of financial instrument, fair market value of A financial instrument is $ 500 and its original cost is $ 400, we will record that financial instrument on $ 500
(B) Recording of Interest Payable
Every financial instrument is issued with a coupon. After checking coupon, issuer will pay the the interest http://www.svtuition.org/2010/02/interest.htmlto investor. If interest is not paid, then both party will record this interest as outstanding. For issuer, it will be outstanding or payable interest and for investor, it will be interest receivables.
(C) Recording of Forex Profit and Loss
If investor or issuer deal in foreign financial instruments, its foreign exchange profit and loss will be shown as revenue earning or loss in profit and loss account.
Financial Reporting of Financial Instruments
In the balance sheet of investor, financial instrument will be shown as asset at fair market value and excess of unrealized earning provision of fair market value over cost will be shown in liability side.
Accounting Treatment of Financial Instruments
(A) Recording of Buying and Selling Value of Financial Instruments
Students should understand that which value should investor or issuer of financial instruments record in his books? Value will not be original cost but it will be fair market value and its information will be find from stock exchange or money market. For example on the date of recording of financial instrument, fair market value of A financial instrument is $ 500 and its original cost is $ 400, we will record that financial instrument on $ 500
(B) Recording of Interest Payable
Every financial instrument is issued with a coupon. After checking coupon, issuer will pay the the interest http://www.svtuition.org/2010/02/interest.htmlto investor. If interest is not paid, then both party will record this interest as outstanding. For issuer, it will be outstanding or payable interest and for investor, it will be interest receivables.
(C) Recording of Forex Profit and Loss
If investor or issuer deal in foreign financial instruments, its foreign exchange profit and loss will be shown as revenue earning or loss in profit and loss account.
Financial Reporting of Financial Instruments
In the balance sheet of investor, financial instrument will be shown as asset at fair market value and excess of unrealized earning provision of fair market value over cost will be shown in liability side.
Liabilities | Amount | Assets | Amount |
| Unrealized Earning Provision ( excess of fair market value over cost) | $ 10000 | Assets will be shown at fair market value | $ 50000 |
Related : CA Final - Financial Reporting Notes
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