Financial assets

In this lesson

1. 0:00 Financial Assets Introduction
2. 2:39 Business Model and Contractual Cash Flow Tests
3. 4:12 Equity Instruments Classification
4. 7:09 Debt Instruments Classification
5. 9:46 Fair Value Through PNL Example
6. 11:46 Amortised Cost Measurement Example
7. 16:05 Fair Value Through OCI Example
8. 18:34 Offsetting and Derecognition

About this lesson

This video covers the classification framework for both equity and debt instruments, showing you when to use fair value through profit and loss, amortised cost, or fair value through other comprehensive income. You'll work through practical examples of shares, loan notes, and investments to understand how each classification affects your financial statements. Mastering this concept is essential for exam success and real-world accounting accuracy. The video breaks down the two key tests that determine how debt instruments are measured: the business model test (your intention to hold the investment) and the contractual cash flow test (whether you receive principal and interest payments). Equity instruments default to fair value through profit and loss unless you elect fair value through OCI for long-term holdings. You'll see how transaction costs are treated differently depending on classification—capitalised for long-term assets, expensed for short-term holdings—and how to calculate interest income using the effective rate method for amortised cost investments. The session includes worked examples showing share investments, loan notes with premiums, and fair value movements, so you can apply these rules confidently to case studies and exam questions.

Duration: 20m