Week 10 Managerial Accounting

THE UNIVERSITY OF NEW SOUTH WALES

Australian School of Business ACCT 3563: Issues in Financial Reporting & Analysis

TUTORIAL - WEEK 10

Accounting for Financial Instruments and Foreign Currency Transactions
Learning Objectives:
1. Understand what is a financial instrument, and how can they be categorised. 2. Accounting for a particular type of financial instrument – a “compound instrument” 3. Understand the accounting treatments of foreign currency transactions at:  Date of transaction;  Balance date (if applicable);  Settlement date. 4. Analyse the accounting treatment of foreign exchange differences by reference to the conceptual framework

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Part A. Basic Concepts
A1. Question from Picker, Chapter 6 Question 5
Describe
b) 5-year government bond paying interest of 5% - held-to-maturity investment, measured at amortised cost.. c) Trade accounts receivable – loans and receivables, measured at amortised cost. d) Trade accounts payable – financial liabilities, measured at amortised cost e) Mandatory converting notes paying interest of 6%. The notes must convert to a variable number of ordinary shares at the expiration of their term - held-to-maturity investment, measured at amortised cost. f) Investment in a portfolio of listed shares held for capital growth – available-for-sale investment, measured at fair value with changes in fair value through equity. g) Investment in a portfolio of listed shares held for short-term gains – held-for-trading; at fair value through profit or loss. h) As in (e) except that in the prior year Company H sold the majority of its held-tomaturity investments to Company Z. Cannot be classified as held-to-maturity, classified as available-for-sale (AASB 139.52), measured at fair value with changes in fair value through equity. i) Borrowing of $1,000,000, carrying a variable interest rate – financial liability, measured at amortised