Question 5 (15 marks)

Discuss how financial assets are measured as per IFRS 9. (3 marks)

Barclays raised finance by issuing , 3 years 5% redeemable shares on 1 January 2020 with nominal value of $600,000 (600000 shares @ $1 each). The shares were issued at 2% discount but redeemable at a premium. Issue costs is $15,000 and effective rate of interest of 12%.

You are required to Illustrate and explain how the above financial instruments should be accounted for Barclays (Pty) Ltd. Furthermore, calculate the premium which each bond will be redeemed for. (12 marks