George plc will need to adopt IFRS 9 from accounting periods beginning on or after 1 January…
George plc will need to adopt IFRS 9 from accounting periods beginning on or after 1 January 2018. George has three different instruments whose accounting George is concerned will change as a result of the adoption of the standard. The three instruments are:
1. An investment in 15% of the ordinary shares of Joshua Ltd, a private company.
2. An investment of €40,000 in 6% debentures redeemable on 30 June 2021. The debentures were acquired at their face value of €40,000 on 1 July 2016 and pay interest half-yearly in arrears on 31 December and 30 June each year. George intends to hold the debentures to collect the interest and principal payments.
3. An interest rate swap taken out to swap floating-rate interest on an outstanding loan to fixed-rate interest. Since taking out the swap the loan has been repaid; however, George plc decided to retain the swap as it was ‘in the money’ at 1 January 2016. The fair value of the swap was a €10,000 asset on 1 January 2016.
Explain how the above instruments should be presented and measured in George’s financial statements under IFRS 9.