5 Ambush, a public limited company, is assessing the impact of implementing the

5 Ambush, a public limited company, is assessing the impact of implementing the revised IAS39 ‘Financial Instruments:

Recognition and Measurement’. The directors realise that significant changes may occur in their accounting treatment

of financial instruments and they understand that on initial recognition any financial asset or liability can be

designated as one to be measured at fair value through profit or loss (the fair value option). However, there are certain

issues that they wish to have explained and these are set out below.

Required:

(a) Outline in a report to the directors of Ambush the following information:

(i) how financial assets and liabilities are measured and classified, briefly setting out the accounting

method used for each category. (Hedging relationships can be ignored.) (10 marks)

5 Report to the Directors of Ambush, a public limited company(a) The following report sets out the principal aspects of IAS 39 in the designated areas.(i) Classification of financial instruments and their measurementFinancial assets and liabilities are in