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reclassification of financial assets

October 25, 2020

Compared with the old accounting standard, the classification of financial assets under the new accounting standard is more principled and rational. New York, NY 10005 2) Define the classification of financial assets. After that the difference will be booked depending on the sign as gain or loss into OCI. The new standard has simplified the classification, and improved the accuracy and authenticity of accounting information, but there are still some defects in its classification. Banana has made a number of acquisitions and disposals of investments during the current financial year and the directors require advice as to the correct accounting treatment of these … The FV at RD becomes new GCA. Most importantly, it reclassified financial assets and used a completely different classification basis, i.e. 3) Guarantee the authenticity of accounting information. The account setting of held-to-maturity investment in the current standard and the corresponding adjustments and changes of the account setting of financial assets measured at the amortized cost according to the changes in the new standard are shown in Table 1. Scientific Research FA at AC 4,720,000 FA at FVOCI 5,400, © 2020 Copyright GRF CPAs & Advisors. Interest Income 70, FA at FVOCI 170,000 FA at AC 90, CFA Institute Does Not Endorse, Promote, Or Warrant The Accuracy Or Quality Of WallStreetMojo. After reclassification, financial assets are divided into three categories. value of the financial asset at If an entity reclassifies financial assets then it shall apply the reclassification prospectively from the reclassification date. Gou, C. (2020) Research on the Reclassification of Financial Assets. The gains, losses and interests which have been recognized in the past can’t be adjusted any more, which shows the prudence of accounting information. The balance sheet displays the company’s total assets, and how these assets are financed, through either debt or equity. Their pattern of representation, valuation, and impairment is different from other methods of reporting. It was designated by the company at the beginning and cannot be reclassified. Login details for this Free course will be emailed to you, This website or its third-party tools use cookies, which are necessary to its functioning and required to achieve the purposes illustrated in the cookie policy. Changes in subjects of held-to-maturity investment. As long as the corresponding conditions are met, financial assets can be reclassified, and the loan should be consistent and equal. In order to better meet needs of the development of market economy, the Ministry of Finance revised the classification and transfer of financial assets in 2017, which would have a series of impacts on financial accounting after the revision. The actual purchase price (including the transaction expenses) was RMB 660,000, and the actual interest rate determined on the purchase day was 5.22%. Through the research, it can be concluded that the reclassification of financial assets can reduce the use of accounting subjects, provide more reliable accounting information, and effectively prevent fraud. The automatic initial and subsequent assignment of an accounting category can be performed in step 1 by the component “Classification of financial assets”. 6, Elements of Financial Statements, since donor-imposed restrictions affect the types and level of service not-for-profit entities can provide when the entities have maintained certain classes of assets may be more significant than whether they have maintained net assets in the aggregate. 1) Financial assets measured at the amortized cost. The holding consciousness is not changed according to the intention of the managers to make the surplus management, so as to include the change of fair value which should be included in the current profit and loss in other comprehensive income. An entity shall not reclassify a financial asset in accordance with paragraph 50B, 50D or 50E before 1 July 2008. The entity shall not restate any previously recognized gains, losses or interest. On December 31st, 2018, the book balance of bonds of Company 1 was RMB 103,720, including the cost of RMB 100,000 and the interest adjustment of RMB 3720. The cumulative gain or loss is removed from equity and adjusted against the FV at RD. This article has been a guide to Financial Assets Examples. FA at FVOCI 70,000 12/31/ 2. I find that approximately one-third of … The current “four categories” of financial assets are changed to “three categories”. FA at AC 50,000 FA at FVPL 600, In case of a reclassification, the component „Reclassification of financial assets“ applies the following rules: 1. About how to implement the financial assets standard better, this paper uses comparative analysis, literature collection and other methods; combines with practical work to make a systematic study; analyzes the background of the revision, reclassification content and its impact.

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