IFRS Accounting for Investments

Course Overview:

Day One: Investment asset classification under IFRS

• Financial investments, and the principal criteria for distinguishing between:

- Equity interests in subsidiaries

- Equity interests in associates and joint ventures

- Financial instruments (i.e. portfolio investments)

• Non-financial investments:

- Property (real estate)

- Alternative investments Financial instruments in detail

- Balance sheet

• Detailed rules for;

- Recognition

- Initial measurement

- Subsequent remeasurement

- Derecogntion

• Difference between equity and debt
• The Fair Value categories: Fair Value through Profit and Loss, and Available for Sale
• The amortised cost categories: Held To Maturity, and Loans and Receivables
• Permitted reclassifications
• Making sense of the available alternatives: why HTM is so unpopular and AFS is so popular
• Accounting for derivatives including embedded derivatives
• Impairment Financial instruments in detail - 2: the income statement
• The amortised cost (effective interest rate) model, and its detailed application to special cases such as;

- Floating rate investments

- Foreign currency investments

- Prepayments and restructurings Non-financial investments

• Real estate: the cost model and the fair value model
• Accounting for leases, both as lessor and lessee
• Impairment and impairment reversal  Special cases: unique (‘iconic') buildings for which no market price is available
• Commodities and other alternative investments

Day Two: Valuing listed and marketable equity investments

• The fair value hierarchy:

- Mark to market

- Mark to model (observable inputs only)

- Mark to model (some unobservable inputs)

• Problems associated with large (i.e. potentially unmarketable) holdings: when premiums and discounts should be applied Valuing equity investments 2: Strategic and unlisted holdings
• Basics of company valuation: the three families of methods and their limitations;

- Book value

- Market multiples

- Discounted cash flow

• Theoretical and practical challenges associated with each Case studies Hedging and hedge accounting
• Rationale for hedge accounting, and comparison with Fair value Option
• Mechanics of hedge accounting for
• Fair value hedges
• Cash flow hedges Update on recent and impending developments
• Progress report on those parts of IFRS 9 (replacement for IAS 39) so far published
• Pending changes to the rules on:

- Amortised cost and impairment

- Hedge accounting