Financial liabilities

In this lesson

1. 0:00 Financial liabilities initial recognition
2. 0:38 Fair value measurement and net proceeds
3. 1:48 Subsequent measurement at amortised cost
4. 3:27 Debenture terminology and key concepts
5. 6:22 Effective interest rate and finance costs
6. 8:12 Deep discount bonds explained
7. 10:01 Worked example Script co loan notes
8. 12:03 Amortised cost calculation year by year
9. 15:02 Statement of financial position presentation
10. 15:37 Finance costs in profit and loss
11. 16:28 Preference shares classification and treatment
12. 19:15 Transaction costs for equity instruments

About this lesson

You'll explore initial recognition at fair value (net proceeds less issue costs), subsequent measurement using amortised cost, and how to apply the effective interest method to spread total finance costs evenly across the life of a liability. The lesson covers loans, debentures, deep discount bonds, and redeemable preference shares with worked examples showing how to calculate carrying amounts, classify liabilities as current or non-current, and record finance costs in the statement of profit and loss. You'll work through a practical scenario involving loan notes issued at a discount with a redemption premium, learning to calculate year-on-year amortised cost balances and understand why the effective interest rate (not the coupon rate paid) determines the finance expense recognised. The lesson also clarifies the distinction between financial liabilities and equity instruments — particularly with preference shares — and explains how transaction costs and dividend payments are treated differently depending on classification. By the end, you'll confidently handle the accounting mechanics of financial liabilities and understand the reasoning behind each treatment.

Duration: 20m