| HOW TO USE THIS DOCUMENT Step 1: attempt cold (§1). Solve from the scenario brief and blank statement shells BEFORE reading any playbook. Retrieval beats recognition. Step 2: mark yourself against §5–6 line by line: classification arguments, every schedule row, every statement line. Step 3: under time pressure: keep §7 (red flags) and §10 (audit checklist) open while you solve any new case. §9 stretches you past the memorized fact pattern. Theory lives in the Core document: read Core §2 (classification + the Robson judgment), §4–5 (pricing + effective interest), §6 (FVOCI overlay) and §8 (statements) first, the six-step plan in §3 cross-references them, and this guide assumes them. TSL is used throughout because it is the exact instrument mix you are tested on: one Amortized Cost bond, one FVOCI bond, one FVPL equity holding: plus both required IFRS 18 statements. |
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1. Cold Attempt First: TSL in Brief + Blank Deliverables
Work from the actual PBL handout if you have it; otherwise this brief has every number. Set a timer, solve on paper, and do not turn the page until you have classified all three investments, built the schedules and entries, and drafted both partial statements below.
1.1 The scenario in brief
Tracking Systems Ltd. (TSL) is a public manufacturer (→ IFRS; no specified main business activity), December 31 year-end. Opening cash Jan 1, 2025: $9,300,000. Its investment book:
| Investment | Facts |
|---|---|
| Northern Bank bonds (bought 1/1/2024) | 980 bonds, $980,000 face, 5% annual coupon paid Dec 31, market rate 4% at purchase. Intent: “may be held to collect the contractual cash flows OR may be sold with favourable changes to interest rates.” Market rate still 4% at 12/31/2024 (FV = amortized cost). 12/31/2025 fair value: $1,135,000; 2025 coupon received in cash. |
| Utilities Ltd. bonds (bought 1/1/2025) | $1,500,000 face, 3% annual coupon paid Jan 1, market rate 4% at purchase. Intent: “funds will be used to finance construction in 5 years” (held to maturity). 12/31/2025 fair value: $1,472,452; 2025 coupon accrued only, cash arrives Jan 1, 2026. |
| BSS Inc. shares (bought 4/1/2025) | 21,100 of 5,000,000 shares outstanding at $37 + $5,400 fees, held to “benefit from profits from the sale … in the near term.” Nov 30: BSS pays total dividends of $2,830,000. 12/31/2025 price: $49. |
1.2 Your blank deliverables (reproduce on paper)
First the classification calls, both tests, in writing:
| Investment | Your classification | Business-model ruling | SPPI ruling |
|---|---|---|---|
| Northern Bank | |||
| Utilities Ltd. | |||
| BSS Inc. |
Then price both bonds, run the schedules, journalize 2025, and complete the two partial statements:
| Partial Statement of Total Comprehensive Income, y/e Dec 31, 2025 | $ |
|---|---|
| Operating Profit (illustrative) | XX |
| (your investing-category lines) | |
| Profit before financing and income taxes | |
| Net Income / Profit | |
| OCI: (your line) | |
| Total Comprehensive Income |
| Partial Statement of Cash Flows (indirect), y/e Dec 31, 2025 | $ |
|---|---|
| OPERATING, starts at Operating Profit | XX |
| (your lines) | |
| INVESTING | |
| (your lines) | |
| FINANCING | |
| Cash, end of year |
| KEY RULE: indicative time budget (proportions over minutes, scale to your clock): ≈15% assess & timeline · ≈30% classification arguments (both tests, each tied to a quoted fact) · ≈30% pricing, schedules & entries · ≈25% statements + audit. On a 60-minute clock: 9 / 18 / 18 / 15. The statements are the deliverable: never let the schedules eat their time. |
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Done? Mark yourself against §5–6. Every mismatched row goes on your study list.
2. How Week 8 PBL Answers Are Marked (and Weighted)
Start where the sample solution starts: the users. Investors and lenders of a public company need transparent reporting of how excess cash is being managed, which is exactly why the P&L-vs-OCI geography of each gain matters, and why AFM 291 grades the Problem-Solving Process, not just the final label. A bare “FVOCI” earns far less than a well-argued conclusion that connects the standard to specific case facts at each step:
| Stage | What the marker wants | TSL example |
|---|---|---|
| Assess the situation | Timeline of past/planned events; surface the classification-driving facts | Purchase dates, coupon dates, year-end FVs, dividend date |
| Identify the issue(s) | Frame the reporting questions precisely | Financial asset? Strategic vs non-strategic? If non-strategic: AC / FVOCI / FVPL? |
| Analyze | State the guidance, then CONNECT to case facts per investment | Business model + SPPI ruling written out per bond |
| Recommendation | Conclude classification; then entries, calcs, statements | Journal entries with calculations + IFRS 18 statements |
| WHY IT MATTERS “Connect to case facts” appears beside every analysis point in the sample solution: that is where the marks live. Quote the trigger fact (“these funds will be used to finance construction in 5 years”), then map it to the standard (“objective is to hold to collect contractual cash flows”). Do this explicitly for BOTH the business model and SPPI. |
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| INDICATIVE MARK WEIGHTING Calibrated to the structure and emphasis of the posted sample solution: not an official marking scheme: classification & analysis ≈ 30%, pricing/schedules/entries ≈ 40%, statement assembly & placement ≈ 30%. Week 8 shifts weight toward mechanics relative to Week 7 because the deliverable includes two full partial statements: but the mechanics are only markable if the classification above them is argued, not asserted. |
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3. The Six-Step Attack Plan (any debt-investment case)
| Step | Do this | Output | Core § |
|---|---|---|---|
| 1 · Timeline | List every past and planned transaction with dates | A dated line, first purchase → reporting date | — |
| 2 · Financial asset? | IAS 32, contractual right to cash (debt) or equity of another entity? | One sentence per investment | §1 |
| 3 · Strategic? | Equity: check % + influence facts. Debt: virtually always non-strategic | Non-strategic → continue | Wk 7 |
| 4 · Two-part test | Business model (collect / collect+sell / trade) AND SPPI, weigh stated policy vs behaviour | AC, FVOCI, or FVPL | §2 |
| 5 · Measure | Initial (PV ± txn costs) → EIM schedule / FV remeasure → interest income | Entries with calculations | §4–6 |
| 6 · Statements | Place every item: IFRS 18 P&L category + cash-flow section | Partial SOCI + partial SCF | §8 |
| KEY RULE Never jump to Step 5 before finishing Step 4 in writing. AC and FVOCI are identical up to the fair-value step: if you have not committed to a classification, you cannot know whether to add the OCI remeasurement, capitalize the fees, or stop at amortized cost. Classification first, always. |
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4. “Assess the Situation”: TSL First Pass
Context that frames the whole answer: TSL is publicly traded → full IFRS applies, no ASPE options. The investments were made with excess cash → a non-strategic posture from the outset. And the business-model wording in each paragraph is planted deliberately, the same device as the lecture’s Robson Engineering case (Core §2.3), so quote it, don’t paraphrase it.
Timeline: 1/1/2024 buy 980 Northern Bank bonds ($980,000 face, 5% coupon Dec 31, market 4% → $1,023,628) → 12/31/2024 year-end (FV = amortized cost, market unchanged) → 1/1/2025 buy Utilities bonds ($1,500,000 face, 3% coupon Jan 1, market 4% → $1,433,223) → 4/1/2025 buy 21,100 BSS shares @ $37 + $5,400 fees → 11/30/2025 BSS pays $2,830,000 total dividends → 12/31/2025 year-end: Utilities FV $1,472,452; Northern FV $1,135,000; BSS $49; Northern coupon received in cash; Utilities coupon accrued only. Opening 2025 cash: $9,300,000.
Issues: (1) Do the investments meet the definition of a financial asset (IAS 32)? (2) If so, strategic or non-strategic, and if non-strategic, is each AC, FVOCI, or FVPL?
| EXAM TRAP The timeline is where the cash-flow marks are won. Northern pays interest Dec 31 (cash received in-year); Utilities pays Jan 1 (2025 interest is ACCRUED, cash arrives Jan 1, 2026). That single distinction is why only $49,000 appears as “interest received” on the cash flow statement: not $94,000, and not the $97,952 income figure. Miss the coupon dates and the SCF is wrong. |
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5. Classification Playbooks A–C (worked on TSL)
Playbook A: Amortized Cost: Utilities Ltd. bonds
| Trigger fact | Ruling |
|---|---|
| “funds will be used to finance construction in 5 years” → held to maturity | Business model = hold to collect |
| Cash flows = 3% annual interest + $1,500,000 face at maturity | Passes SPPI |
| Coupon 3% < market 4% | Priced at a discount: $1,433,222.67 (N5, I/Y4, PMT45,000, FV1,500,000 → CPT PV) |
Conclusion: Amortized Cost. The year-end FV of $1,472,451.91 is a distractor: AC is never remeasured to fair value.
| 1/1/2025: initial recognition | 1/1/2025: initial recognition | 1/1/2025: initial recognition |
|---|---|---|
| Utilities Ltd. Amortized Cost Bonds | 1,433,223 | |
| Cash | 1,433,223 | |
| Purchase price = PV of cash flows at the 4% market rate. | Purchase price = PV of cash flows at the 4% market rate. | Purchase price = PV of cash flows at the 4% market rate. |
| 12/31/2025: interest (EIM); coupon paid Jan 1 → RECEIVABLE | 12/31/2025: interest (EIM); coupon paid Jan 1 → RECEIVABLE | 12/31/2025: interest (EIM); coupon paid Jan 1 → RECEIVABLE |
|---|---|---|
| Interest Receivable | 45,000 | |
| Utilities Ltd. Amortized Cost Bonds | 12,329 | |
| Interest Income (NI) | 57,329 | |
| Income = 1,433,223 × 4% = 57,329; cash coupon = 1,500,000 × 3% = 45,000; discount amortization plug = 12,329. No fair-value entry. | Income = 1,433,223 × 4% = 57,329; cash coupon = 1,500,000 × 3% = 45,000; discount amortization plug = 12,329. No fair-value entry. | Income = 1,433,223 × 4% = 57,329; cash coupon = 1,500,000 × 3% = 45,000; discount amortization plug = 12,329. No fair-value entry. |
Playbook B: FVOCI: Northern Bank bonds
| Trigger fact | Ruling |
|---|---|
| “may be held to collect the contractual cash flows OR may be sold with favourable changes to interest rates” | Business model = hold to collect AND sell |
| Cash flows = 5% annual interest + $980,000 face at maturity | Passes SPPI |
| Coupon 5% > market 4% | Priced at a premium: $1,023,627.86 (N5, I/Y4, PMT49,000, FV980,000 → CPT PV) |
| ROBSON PARALLEL This is the lecture’s Robson Engineering judgment (Core §2.3) restaged: TSL’s portfolio language (“may be held … or may be sold”) is the textbook trigger for collect-and-sell, just as Robson’s stated hold-to-maturity objective was overridden by its stated intention, and history, of selling for profit. In both cases the mark is earned by quoting the wording and weighing it, not by asserting the label. |
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Conclusion: FVOCI. Bought 1/1/2024, so roll 2024 forward first, either with journal entries or a continuity schedule (both earn full credit):
| Date | Cash (5%) | Income (4%) | Amortized | Amortized cost |
|---|---|---|---|---|
| 1/1/2024 | — | — | — | 1,023,627.86 |
| 12/31/2024 | 49,000.00 | 40,945.11 | (8,054.89) | 1,015,572.97 |
| 12/31/2025 | 49,000.00 | 40,622.92 | (8,377.08) | 1,007,195.89 |
No 12/31/2024 fair-value adjustment: the market rate stayed at 4%, so fair value = amortized cost, write that sentence, it is a mark.
| 12/31/2025: interest (EIM on the premium: bond written DOWN) | 12/31/2025: interest (EIM on the premium: bond written DOWN) | 12/31/2025: interest (EIM on the premium: bond written DOWN) |
|---|---|---|
| Cash | 49,000 | |
| Northern Bank FVOCI Bonds | 8,377 | |
| Interest Income (NI) | 40,623 | |
| 1,015,573 × 4% = 40,623; premium amortization credits the bond. | 1,015,573 × 4% = 40,623; premium amortization credits the bond. | 1,015,573 × 4% = 40,623; premium amortization credits the bond. |
| 12/31/2025: fair-value remeasurement (Step 2, to OCI) | 12/31/2025, fair-value remeasurement (Step 2, to OCI) | 12/31/2025, fair-value remeasurement (Step 2, to OCI) |
|---|---|---|
| Northern Bank FVOCI Bonds | 127,804 | |
| Unrealized/Holding Gain, FVOCI (OCI) | 127,804 | |
| FV 1,135,000 − (1,015,573 − 8,377 = 1,007,196) = 127,804. | FV 1,135,000 − (1,015,573 − 8,377 = 1,007,196) = 127,804. | FV 1,135,000 − (1,015,573 − 8,377 = 1,007,196) = 127,804. |
| EXAM TRAP Two live traps here. (1) Interest income is 4% of AMORTIZED COST ($1,015,573), not 5% of face, and not any % of the $1,135,000 fair value. (2) The premium amortizes the bond DOWN (credit the bond, $8,377), the opposite direction from the Utilities discount bond. Interest ($40,623) went to NI; only the $127,804 remeasurement went to OCI. |
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Playbook C: FVPL equity: Barcode Software Systems (BSS) shares
Equity classification logic is Week 7 territory, this is the 60-second version needed for TSL.
| Trigger fact | Ruling |
|---|---|
| 21,100 / 5,000,000 = 0.42%; no influence facts | < 20% → no significant influence → non-strategic |
| Equity: cash flows are dividends + sale proceeds | Fails SPPI → cannot be AC or FVOCI |
| “benefiting from profits from the sale … in the near term” | Held for trading → FVPL; OCI election UNAVAILABLE |
| 4/1/2025: initial (FVPL fees EXPENSED) | 4/1/2025, initial (FVPL fees EXPENSED) | 4/1/2025, initial (FVPL fees EXPENSED) |
|---|---|---|
| BSS Inc. Investment, FVPL | 780,700 | |
| Investment Transaction Fee (NI) | 5,400 | |
| Cash | 786,100 | |
| 21,100 × $37 = 780,700. | 21,100 × $37 = 780,700. | 21,100 × $37 = 780,700. |
| 11/30/2025: dividend (total × your %) | 11/30/2025, dividend (total × your %) | 11/30/2025, dividend (total × your %) |
|---|---|---|
| Cash | 11,943 | |
| Dividend Income (NI) | 11,943 | |
| 21,100/5,000,000 × 2,830,000 = 11,942.60 → 11,943. | 21,100/5,000,000 × 2,830,000 = 11,942.60 → 11,943. | 21,100/5,000,000 × 2,830,000 = 11,942.60 → 11,943. |
| 12/31/2025: FV remeasurement (to NET INCOME) | 12/31/2025: FV remeasurement (to NET INCOME) | 12/31/2025: FV remeasurement (to NET INCOME) |
|---|---|---|
| BSS Inc. Investment, FVPL | 253,200 | |
| Unrealized Gain, FVPL Investment (NI) | 253,200 | |
| (21,100 × $49) − 780,700 = 253,200. | (21,100 × $49) − 780,700 = 253,200. | (21,100 × $49) − 780,700 = 253,200. |
6. Assembling the IFRS 18 Statements (the actual TSL deliverable)
TSL is a manufacturer, no specified main business activity in investing. So all investment income sits in the Investing category of the P&L (below Operating Profit), and the amended IAS 7 defaults apply to the cash flow statement.
6.1 Partial Statement of Total Comprehensive Income, year ended Dec 31, 2025
| Line (IFRS 18 structure) | Amount ($) |
|---|---|
| Revenue … Operating expenses (illustrative only, do not invent figures) | XX |
| Operating Profit | XX |
| Interest income (57,329 Utilities + 40,623 Northern) | 97,952 |
| Dividend income (BSS) | 11,943 |
| Transaction fees (BSS, FVPL) | (5,400) |
| Unrealized gain, FVPL investment (BSS) | 253,200 |
| Profit before financing and income taxes | 357,694 |
| Interest expense / income taxes (illustrative) | — |
| Net Income / Profit | 357,694 |
| Other Comprehensive Income, unrealized gain, FVOCI investment (Northern) | 127,804 |
| Total Comprehensive Income | 485,499 |
| ROUNDING So your total doesn’t spook you: in exact cents the NI items sum to 357,694.43 and OCI is 127,804.11, so TCI = 485,498.54. The sample solution rounds line-by-line (357,694 and 127,804) but shows TCI as 485,499, off the visible sum by $1. State amounts to the dollar and don’t chase the $1; markers accept consistent rounding. |
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6.2 Partial Statement of Cash Flows (indirect), year ended Dec 31, 2025
| Line | Amount ($) |
|---|---|
| OPERATING, starts at Operating Profit (IFRS 18), not net income | XX |
| Purchase of FVPL trading shares (BSS: IAS 7 ¶14(f)) | (786,100) |
| Cash used in operating activities | (786,100) |
| INVESTING | |
| Interest received (Northern ONLY: Utilities coupon not yet received) | 49,000 |
| Purchase of amortized cost bond (Utilities) | (1,433,223) |
| Dividends received (BSS) | 11,943 |
| Cash used in investing activities | (1,372,280) |
| FINANCING, none for these investments | 0 |
| Cash used during the year | (2,158,380) |
| Cash, beginning of year | 9,300,000 |
| Cash, end of year | 7,141,620 |
The Cash T-account the solution recommends (not required, but it catches errors in 30 seconds):
| Dr (in) | Cr (out) |
|---|---|
| Opening 9,300,000.00 | Utilities bond 1,433,222.67 |
| Northern coupon 49,000.00 | BSS shares + fees 786,100.00 |
| BSS dividend 11,942.60 | |
| Ending balance 7,141,619.93 ≈ 7,141,620 |
| EXAM TRAP The classic marks-grab: the FVPL PURCHASE ($786,100) is an OPERATING outflow (held for trading, IAS 7 ¶14(f)) while the DIVIDEND it pays ($11,943) is INVESTING, same security, two sections. And the $97,952 of interest INCOME is not the $49,000 of interest RECEIVED: accrual ≠ cash. Never copy P&L numbers onto the SCF. |
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7. Red-Flag Phrases: What the Case Writer Is Signalling
| If the case says… | It signals… | Action |
|---|---|---|
| “held to collect” / “held to maturity” / “to finance X in N years” | Hold-to-collect model | → Amortized Cost (if SPPI passes) |
| “may be held to collect OR may be sold” / “sold with favourable rate changes” | Collect-and-sell model | → FVOCI |
| “will also sell for profit” / “has historically sold from this portfolio” | Behaviour overrides a hold-to-maturity label (Robson) | → FVOCI, weigh policy vs behaviour in writing |
| “profit from sale in the near term” / “trading” | Held for trading | → FVPL (equity: election unavailable) |
| “X% of the shares” / board seat | Strategic threshold check | Influence test: Week 7 logic |
| Coupon date ≠ year-end (pays Jan 1, YE Dec 31) | Accrued interest, no cash yet | Interest Receivable; EXCLUDE from “interest received” |
| A year-end fair value is given | Remeasurement may be needed | FVOCI → OCI; FVPL → NI; AC → ignore (distractor) |
| “market rate remained at X%” | FV = amortized cost that date | No adjustment, say so explicitly |
| “transaction fees / commission of $X” | Cost fork by class | Capitalize (AC/FVOCI) or expense (FVPL) |
8. The Mistakes That Actually Cost Marks
- Fair-valuing an Amortized Cost bond. The given year-end FV is a distractor: AC is never remeasured.
- Computing interest income on face or on fair value. Always market rate × opening amortized cost, recomputed every period.
- Amortizing the wrong direction. Discount → debit the bond up; premium → credit the bond down. Sanity-check against the pricing table.
- Routing FVOCI interest income (or impairment) to OCI. Interest and impairment → NI; only the residual FV change → OCI.
- Capitalizing FVPL transaction fees (or expensing AC/FVOCI costs). State the rule in the entry.
- Putting accrued interest in “interest received.” Only cash actually received in the year belongs on the SCF.
- Assuming P&L category = cash-flow section. Decided under separate rule sets, the trading purchase proves it.
- Writing “FVOCI” for a private ASPE company. ASPE has no OCI, the answer doesn’t exist there.
- Concluding a classification with only one test stated. Write the business-model ruling AND the SPPI ruling, each tied to a quoted case fact.
- Forgetting the OCI recycling entry when an FVOCI bond is sold. The accumulated OCI must be reclassified through NI (Drill 4), and no calculation under an entry means no partial credit; bracket the arithmetic.
9. If the Facts Flipped: Counterfactual Drills (now incl. the recycling sale)
The exam bond will not be TSL’s. Each drill changes ONE fact, work it cold, then check. All four run off numbers you already have.
Drill 1: Utilities held to collect AND sell
Flip: TSL “may sell the Utilities bonds if construction funding needs change.” Re-classify and redo 12/31/2025.
| ANSWER Collect-and-sell + SPPI → FVOCI. Step 1 is IDENTICAL (interest income $57,329; amortized cost → 1,433,223 + 12,329 = $1,445,552). Step 2 now runs: FV 1,472,452 − 1,445,552 = $26,900 to OCI (Dr Bonds / Cr Unrealized Gain, FVOCI). B/S shows $1,472,452 instead of $1,445,552; NI unchanged; OCI rises by 26,900. The “distractor” FV becomes live the moment the business model changes. |
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Drill 2: Northern held to maturity only
Flip: Northern was bought strictly to hold to maturity. What changes at 12/31/2025?
| ANSWER Hold-to-collect + SPPI → Amortized Cost. The interest entry is IDENTICAL (income $40,623; premium amortization 8,377 credits the bond). The ONLY change: skip the Step-2 remeasurement: no $127,804 OCI gain; B/S shows amortized cost $1,007,196 instead of FV $1,135,000. NI unchanged at 357,694; OCI = 0; TCI = 357,694. One business-model sentence moved $127,804 of comprehensive income. |
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Drill 3: BSS held long-term with the OCI election
Flip: BSS shares are a long-term hold; TSL elects OCI at acquisition. Redo the entries and BOTH statements.
| ANSWER Election available (equity + not held for trading + elected at initial recognition). Fees CAPITALIZED → asset $786,100. Dividend $11,943 still NI. Year-end: (21,100 × $49) − 786,100 = $247,800 to OCI, and the $5,400 fee line disappears from NI. New P&L: investing = 97,952 + 11,943 = 109,895 = NI; OCI = 127,804 + 247,800 = 375,604; TCI = 485,499: unchanged. Classification moved ≈$247,800 out of NI into OCI, but total comprehensive income is invariant. SCF flips too: no trading purchase, so operating = 0 and the $786,100 moves to INVESTING; total cash change and ending cash ($7,141,620) are identical, cash doesn’t care about classification. |
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Drill 4 (NEW: Northern sold Jan 2, 2026) the recycling entry TSL never asks for
Flip: early in January 2026, TSL sells the whole Northern position for its 12/31/2025 fair value, $1,135,000 (assumed; the annual coupon was just paid, so no accrued interest). Journalize the sale. Recycling is the one Week 8 mechanic the TSL PBL never tests, drill it here (Core §7). This drill is an extension, not part of the posted solution.
| ANSWER Carrying amount = FV $1,135,000; amortized cost $1,007,196; accumulated OCI $127,804. Entry: Dr Cash 1,135,000 · Dr OCI on FVOCI Investments (reclassification) 127,804 · Cr Northern Bank FVOCI Bonds 1,135,000 · Cr Gain on Sale of FVOCI Investments (NI) 127,804. The NI gain = proceeds − amortized cost (1,135,000 − 1,007,196), exactly the OCI being emptied. Recycling re-labels comprehensive income already recognized; it creates none. (Contrast Week 7’s equity OCI election, which NEVER recycles.) |
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10. Scenario Audit Checklist (run before submitting)
☐ Financial asset confirmed under IAS 32 for each investment (contractual right to cash / equity of another entity)?
☐ Strategic vs non-strategic settled (equity: % + influence facts)?
☐ SPPI ruling written explicitly for every instrument?
☐ Business-model ruling written explicitly, quoting the trigger fact, and weighing stated policy against past selling behaviour?
☐ Discount or premium identified from coupon vs market, and does the carrying amount move the right way?
☐ Transaction costs handled by class (capitalize AC/FVOCI; expense FVPL)?
☐ Interest income = market rate × opening carrying amount, recomputed each period?
☐ FV remeasurement done for FVOCI (→ OCI) and FVPL (→ NI); skipped for AC?
☐ If an FVOCI bond was SOLD: accrued interest stripped, gain measured vs amortized cost, and accumulated OCI recycled through NI?
☐ Coupon dates checked, cash received vs receivable accrued?
☐ Every income item in an IFRS 18 category; every cash item in a section (trading purchase → operating)?
☐ Subtotals shown: Operating Profit → Profit before financing and income taxes → NI → TCI?
☐ If ASPE: FVOCI/OCI removed and debt defaulted to amortized cost?
11. Self-Test: Reproduce TSL Cold
| Prompt | Answer to hit |
|---|---|
| Classify all three investments, both tests each | Utilities = AC; Northern = FVOCI; BSS = FVPL |
| Price both bonds on the BAII+ | 1,433,222.67 (N5, I/Y4, PMT45k, FV1.5M); 1,023,627.86 (N5, I/Y4, PMT49k, FV980k) |
| Utilities 12/31/2025 interest entry | Dr Int. Receivable 45,000 + Dr Bond 12,329 / Cr Int. Income 57,329 |
| Northern 12/31/2025 entries (both) | Cr Bond 8,377, Int. Income 40,623; then Dr Bond 127,804 / Cr OCI gain |
| Northern 12/31/2025 amortized cost before FV step | 1,007,196 (= 1,015,573 − 8,377) |
| BSS: three entries and why fees are expensed | 780,700 + fee 5,400 (FVPL); div 11,943; FV gain 253,200 (NI) |
| P&L: investing-category total and NI | 97,952 + 11,943 − 5,400 + 253,200 = 357,694 (round-line note: TCI 485,499) |
| SCF: the three investing lines | Interest recd 49,000; Utilities (1,433,223); dividends 11,943 → (1,372,280) |
| Why is the BSS purchase an operating outflow? | Held for trading: IAS 7 ¶14(f) exception |
| Sell Northern 1/2/2026 at $1,135,000, full entry | Dr Cash 1,135,000 + Dr OCI (reclass) 127,804 / Cr Bonds 1,135,000 + Cr Gain (NI) 127,804 |
| Ending cash | 9,300,000 − 786,100 − 1,372,280 = 7,141,620 |
| DEBRIEF LOOP After the PBL session, re-solve TSL cold and diff against the posted solution line by line: classification arguments, every schedule row, every statement line. Anything missed goes on your quick-reference sheet. |
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Source: Week 8 PBL “Tracking Systems Ltd.” and posted sample solution (© 2026 Donna Psutka, AFM 291); IFRS 9, IAS 32, IAS 7/IFRS 18, ASPE 3856. All figures independently recomputed and reconciled to the sample solution. Drill 4 is a study extension beyond the posted solution.