Financial instruments - part 3

In this lesson

1. 0:00 Financial instruments and amortised cost introduction
2. 1:01 Classifying shares as fair value financial assets
3. 2:19 Understanding loan characteristics and discount pricing
4. 3:43 Recording fair value shares at initial measurement
5. 4:35 Fair value shares double entry and OCI treatment
6. 5:31 Amortised cost loans initial measurement and cost
7. 6:58 Amortised cost subsequent measurement calculation
8. 8:16 Amortised cost double entry and annual accrual

About this lesson

This builds directly on earlier concepts and shows you exactly how to record initial recognition, subsequent revaluation, and the double entries required for your Financial Reporting or Advanced Financial Reporting papers. The first instrument covers fair value accounting for equity investments held long-term. You'll see how to record the initial purchase at cost, then remeasure at year-end fair value with gains or losses flowing through OCI rather than profit and loss. This demonstrates why intention matters when classifying financial assets. The second instrument introduces amortised cost accounting for a loan purchased at a discount. You'll learn the critical distinction between the face value and the actual purchase price, then apply the amortised cost formula using the effective interest rate method. The worked example shows how interest receivable (based on the market rate) differs from interest received (based on the coupon rate), and how this difference gradually increases the carrying value of the asset until maturity. These techniques are essential for handling complex financial instrument questions in your exams.

Duration: 9m