Initial recognition of the financial instruments, Financial Management

a) On 1st January 2010, Grimm issued 400,000 convertible £1 6% debentures  for £600,000.  The professional fees associated with the issue were £40,000 and the fair value of similar debentures with no conversion rights was £550,000.  The terms of conversion were that, at the end of the three year period (31st December 2012), four £1 ordinary shares would be issued for every five debentures held.  If any debentures holders opted not to convert, they would be repaid at £1.50 per debenture.  At 31st December 2012, 80% of the debenture holders chose to convert and the remainder took the repayment.  The effective interest rate was calculated at 10.0355%.

b)  On 30 April 2012, Grimm purchased 8,000 shares in Rosalie Ltd at a cost of £10,000.  Arrangement fees were £800 and the estimated market value of these shares was £13,000 on 31st December 2012.

c)  On 1st June 2011, Grimm purchased 40,000 50p ordinary shares in Hank plc for £0.70 per share and opted to classify this investment as FVTOCI.  Professional fees incurred in relation to the purchase were £1,000.  On 31st December 2011, these shares were trading at £1.00 per share.  Grimm decided to sell 25% of the share holding at the market price of £1.30 on 31st October 2012.  The share price of Hank plc at 31st December 2012 was £1.50 per share.

d) On 31st August 2011, Grimm had entered into a foreign currency contract which had an initial fair value of nil but incurred arrangement fees of £2,000.  On 31stDecember 2011, the negative value of the contract was £40,000.  At 31st December 2012, the contract had a positive value of £25,000.

Posted Date: 2/12/2013 6:31:08 AM | Location : United States

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