Ican 2025 Corporate Reporting Question 5

Aribatise is a public liability company which holds a few financial instruments: Required: Discuss how these transactions should be accounted for in accordance with IAS 32 and IFRS 9 in the financial statements to December 31, 2024. a. A 3% bond purchased on January 1, 2022 for N500,000. The nominal value is N600,000 and redemption will be at par on December 31, 2027. The coupon is received annually in arrears. The effective interest rate on the bond is 9.7%. The company has classified the bond as “held to maturity”. The market value of the bond at December 31, 2024 is N550,000. b. An investment was made in the equity shares of Ojutiri Plc. 6,000 shares were purchased (a 1% stake) at a cost of N20 per share on April 1, 2022. A transaction fee of N600 was charged on the purchase. The firm intended to sell the shares within three months and so classed the investment as fair value through profit or loss. The market value of the investment continued to rise and so the company decided not to sell in the near future. The market value of the shares over the three years has been as follows: N’000 December 31, 2022 64 December 31, 2023 68 December 31, 2024 70 c. The company issued a convertible bond at par on December 31, 2024, raising N1,000,000. The coupon on the bond is 4%. The rate on an equivalent redeemable bond is 7%. The bond can be redeemed at par on December 31, 2027 or converted into equity shares at a rate of five shares per N200.