Determine the correct classification of each financial instrument for the year ended 30 June 2021 in Xonobo’s individual financial statements (i.e. not consolidated financial statements). Justify your decision using the requirements of AASB 9 Financial Instruments.
Xonobo Limited is the parent company in a large, consolidated group. Vincent, the financial controller at Xonobo, is reviewing Xonobo’s financial instruments to determine their correct classification under AASB 9 Financial Instruments. Vincent has the following information from the treasury team concerning two financial assets:
A bond with a face value of $500,000 and a four-year maturity was acquired on 1 July 2020. Interest is received at 2% per annum and paid in arrears every six months. Xonobo uses the bonds to manage cash flow requirements through collecting the interest cash flows or selling the bonds as required.
During the year, Xonobo loaned a subsidiary $100,000 interest-free. The loan is due to be repaid in three years’ time. Xonobo has a policy of holding all intragroup loans to maturity.
Required:
Determine the correct classification of each financial instrument for the year ended 30 June 2021 in Xonobo’s individual financial statements (i.e. not consolidated financial statements).
Justify your decision using the requirements of AASB 9 Financial Instruments.
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