Plyway Ltd (Plyway) was founded in 2001 and operates in the logistics and supply chain management sector. It prepares financial statements in accordance with International Financial Reporting Standards (IFRSs) up to 31 December each year.

On 1 January 2017, Plyway purchased a GH¢50 million social bond from a renowned finance house. The bond pays a respectable 6% annual interest, which is also the effective rate of interest payable on 31 December. Plyway has classified the bond at fair value through profit or loss.

At 31 December 2019, the carrying value of the bond is GH¢50 million but there are reliable reports within the financial sector that the finance house has financial difficulties. The market interest is now 8%. The cash flows in respect of the bond are as follows:

Year Amount                                        GH¢m
31 December 2019                                    4
31 December 2020                                  3.5
31 December 2021                                 42.5

Interest received for the accounting year ended 31 December 2019 has already been correctly accounted for.

Required:
In accordance with IFRS 9: Financial Instruments, show with appropriate calculations, the accounting entries required to record the transaction above in the financial statements of Plyway for the year ended 31 December 2019. (6 marks)

Asamankese Ltd (Asamankese) purchased a 6% GH¢50 million bond on 1 August 2018 at a 10% discount to par value. Expenses of purchase were GH¢500,000. The bond is due for redemption on 31 July 2028 at par. The effective annual interest rate to maturity is 7.3%. Asamankese intends to hold the bond until its maturity date.

Required:
In accordance with IFRS 9: Financial Instruments, how much should be recognised in Asamankese financial statements in respect of the above transaction for the year ended 31 July 2019 (to two decimal places)?   (5 marks)

Sukura Ltd is preparing its financial statements for the year ended 31 December 2018. Sukura Ltd entered into a contractual arrangement on 1 September 2018 with another company, Mammobi Ltd, setting up an unquoted entity, Awoshi Electronics. However, in this arrangement Sukura Ltd only has a 15% shareholding and does not have any influence in the day to day financial and operating policies. Sukura Ltd has recorded the investment in Awoshi Electronics at its cost on 1 September 2018, being the carrying amount of the equipment and cash transferred at that date. No subsequent changes were made to the carrying amount.
Required:
Advise the directors on the accounting treatment of the above in Sukura Ltd’s financial statements for the year ended 31 December 2018.                                                                                                                                                               (4 marks)

Bawaleshie Ltd controls the following financial assets at its reporting date of 31 January 2017:
i) An investment in the equity shares of Obojo Ltd was purchased during April 2016 for GH¢2.6 million. The fair value of this investment at 31 January 2017 was GH¢2.8 million. Bawaleshie Ltd decided at the date of purchase to recognize any fair value gains and losses through other comprehensive income.                                                                                                 (2 marks)

ii) An investment in a bond issued by Shiashie Ltd on 1 February 2016. This bond cost GH¢10 million (equal to its par value) and entitles Bawaleshie Ltd to 8% interest per annum on the anniversary of the bond’s issue. The principal is to be returned on 31 January 2021. It is the intention of Bawaleshie Ltd to retain the bond in order to collect the contracted cash flows on the due dates.                                                                                                                                                                               (3 marks)
Required:
Recommend how the above financial assets should be accounted for at 31 January 2017 in accordance with the requirements of IFRS 9 Financial Instruments.

Naniama Ltd issued 3,000 convertible bonds at par. The bonds are redeemable in 4 years’ time at their par value of GH¢100 per bond. The bonds pay interest annually in arrears at an interest rate (based on nominal value) of 5%. Each bond can be converted at the maturity date into 5 GH¢1.00 shares. The prevailing market interest rate for four year bonds that have no right of conversion is 8%.
The present value at 8% of GH¢1 receivable at end of:

Required:
Show the initial accounting treatment of the bond in accordance with International Financial Reporting Standards (IFRS).       (5 marks)