Day one difference analysis: Instrument X

Context

Banque Altavia (fictitious entity) acquired three instruments in January 20X5 and runs two derivatives desks. For the 31 December 20X5 closing, the finance department asks you to deal with the difference between price and fair value for each instrument and to check whether the desks may measure their positions on a net basis.

Assignment

Day one difference analysis

Purpose of the workpaper

For each transaction (one instance per instrument), describe the facts and the standard that applies to the item, compare the transaction price with the fair value given by the technique, compute the initial difference and, where relevant, the calibration adjustment, justify the treatment (no difference, profit or loss, deferral) under the applicable standard, then prepare the entry and its effect on the financial statements. IFRS 13 does not itself say where to recognise the difference: the treatment refers to the standard that applies to the item.

Questions of the file covered by this workpaper

• Compute the initial difference of X and Y.
• Compute the calibration adjustment of W.
• Which treatment should be used for the difference of X, Y and W? Justify.
• Record the acquisitions of X and Y.

• ContractInstrument XOpen
• ContractInstrument YOpen
• MemoTreatment under the applicable standard (case data)Open
• ScheduleInstrument WOpen
• ScheduleDesk AOpen
• MemoDesk BOpen
• MemoIT budgetOpen