OGRIN0/GPT2-ias-28-ifrs-9 · Datasets at Hugging Face

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comprehensive income. Consider, for example, a hedge of the foreign
currency risk of a net position of foreign currency sales of FC100 and foreign
currency expenses of FC80 using a forward exchange contract for FC20. The
gain or loss on the forward exchange contract that is reclassified from the
cash flow hedge reserve to profit or loss (when the net position affects profit
or loss) shall be presented in a separate line item from the hedged sales and
expenses. Moreover, if the sales occur in an earlier period than the expenses,
the sales revenue is still measured at the spot exchange rate in accordance
with IAS 21. The related hedging gain or loss is presented in a separate line
item, so that profit or loss reflects the effect of hedging the net position, with
a corresponding adjustment to the cash flow hedge reserve. When the hedged
expenses affect profit or loss in a later period, the hedging gain or loss
previously recognised in the cash flow hedge reserve on the sales is
reclassified to profit or loss and presented as a separate line item from those
that include the hedged expenses, which are measured at the spot exchange
rate in accordance with IAS 21.
For some types of fair value hedges, the objective of the hedge is not primarily
to offset the fair value change of the hedged item but instead to transform the
cash flows of the hedged item. For example, an entity hedges the fair value
interest rate risk of a fixed-rate debt instrument using an interest rate swap.
The entity’s hedge objective is to transform the fixed-interest cash flows into
floating interest cash flows. This objective is reflected in the accounting for
the hedging relationship by accruing the net interest accrual on the interest
rate swap in profit or loss. In the case of a hedge of a net position (for
example, a net position of a fixed-rate asset and a fixed-rate liability), this net
interest accrual must be presented in a separate line item in the statement of
profit or loss and other comprehensive income. This is to avoid the grossing
up of a single instrument’s net gains or losses into offsetting gross amounts
and recognising them in different line items (for example, this avoids grossing
up a net interest receipt on a single interest rate swap into gross interest
revenue and gross interest expense).B6.6.14
B6.6.15
B6.6.16IFRS 9
© IFRS Foundation A537
Effective date and transition (Chapter 7)
Transition (Section 7.2)
Financial assets held for trading
At the date of initial application of this Standard, an entity must determine
whether the objective of the entity’s business model for managing any of its
financial assets meets the condition in paragraph 4.1.2(a) or the condition in
paragraph 4.1.2A(a) or if a financial asset is eligible for the election in
paragraph 5.7.5 . For that purpose, an entity shall determine whether financial
assets meet the definition of held for trading as if the entity had purchased
the assets at the date of initial application.
Impairment
On transition, an entity should seek to approximate the credit risk on initial
recognition by considering all reasonable and supportable information that is
available without undue cost or effort. An entity is not required to undertake
an exhaustive search for information when determining, at the date of
transition, whether there have been significant increases in credit risk since
initial recognition. If an entity is unable to make this determination without
undue cost or effort paragraph 7.2.20 applies.
In order to determine the loss allowance on financial instruments initially
recognised (or loan commitments or financial guarantee contracts to which
the entity became a party to the contract) prior to the date of initial
application, both on transition and until the derecognition of those items an
entity shall consider information that is relevant in determining or
approximating the credit risk at initial recognition. In order to determine or
approximate the initial credit risk, an entity may consider internal and
external information, including portfolio information, in accordance with
paragraphs B5.5.1–B5.5.6.
An entity with little historical information may use information from internal
reports and statistics (that may have been generated when deciding whether
to launch a new product), information about similar products or peer group
experience for comparable financial instruments, if relevant.
Definitions (Appendix A)
Derivatives
Typical examples of derivatives are futures and forward, swap and option
contracts. A derivative usually has a notional amount, which is an amount of
currency, a number of shares, a number of units of weight or volume or other
units specified in the contract. However, a derivative instrument does not
require the holder or writer to invest or receive the notional amount at the
inception of the contract. Alternatively, a derivative could require a fixed
payment or payment of an amount that can change (but not proportionally
with a change in the underlying) as a result of some future event that isB7.2.1
B7.2.2
B7.2.3
B7.2.4
BA.1IFRS 9
A538 © IFRS Foundation
unrelated to a notional amount. For example, a contract may require a fixed
payment of CU1,000 if six -month LIBOR increases by 100 basis points. Such a
contract is a derivative even though a notional amount is not specified.
The definition of a derivative in this Standard includes contracts that are
settled gross by delivery of the underlying item (eg a forward contract to
purchase a fixed rate debt instrument). An entity may have a contract to buy
or sell a non-financial item that can be settled net in cash or another financial
instrument or by exchanging financial instruments (eg a contract to buy or
sell a commodity at a fixed price at a future date). Such a contract is within
the scope of this Standard unless it was entered into and continues to be held
for the purpose of delivery of a non-financial item in accordance with the
entity’s expected purchase, sale or usage requirements. However, this
Standard applies to such contracts for an entity’s expected purchase, sale or
usage requirements if the entity makes a designation in accordance with
paragraph 2.5 (see paragraphs 2.4–2.7).
One of the defining characteristics of a derivative is that it has an initial net
investment that is smaller than would be required for other types of contracts
that would be expected to have a similar response to changes in market
factors. An option contract meets that definition because the premium is less
than the investment that would be required to obtain the underlying financial

comprehensive income. Consider, for example, a hedge of the foreign

currency risk of a net position of foreign currency sales of FC100 and foreign

currency expenses of FC80 using a forward exchange contract for FC20. The

gain or loss on the forward exchange contract that is reclassified from the

cash flow hedge reserve to profit or loss (when the net position affects profit

or loss) shall be presented in a separate line item from the hedged sales and

expenses. Moreover, if the sales occur in an earlier period than the expenses,

the sales revenue is still measured at the spot exchange rate in accordance

with IAS 21. The related hedging gain or loss is presented in a separate line

item, so that profit or loss reflects the effect of hedging the net position, with

a corresponding adjustment to the cash flow hedge reserve. When the hedged

expenses affect profit or loss in a later period, the hedging gain or loss

previously recognised in the cash flow hedge reserve on the sales is

reclassified to profit or loss and presented as a separate line item from those

that include the hedged expenses, which are measured at the spot exchange

rate in accordance with IAS 21.

For some types of fair value hedges, the objective of the hedge is not primarily

to offset the fair value change of the hedged item but instead to transform the

cash flows of the hedged item. For example, an entity hedges the fair value

interest rate risk of a fixed-rate debt instrument using an interest rate swap.

The entity’s hedge objective is to transform the fixed-interest cash flows into

floating interest cash flows. This objective is reflected in the accounting for

the hedging relationship by accruing the net interest accrual on the interest

rate swap in profit or loss. In the case of a hedge of a net position (for

example, a net position of a fixed-rate asset and a fixed-rate liability), this net

interest accrual must be presented in a separate line item in the statement of

profit or loss and other comprehensive income. This is to avoid the grossing

up of a single instrument’s net gains or losses into offsetting gross amounts

and recognising them in different line items (for example, this avoids grossing

up a net interest receipt on a single interest rate swap into gross interest

revenue and gross interest expense).B6.6.14

B6.6.15

B6.6.16IFRS 9

Effective date and transition (Chapter 7)

Transition (Section 7.2)

Financial assets held for trading

At the date of initial application of this Standard, an entity must determine

whether the objective of the entity’s business model for managing any of its

financial assets meets the condition in paragraph 4.1.2(a) or the condition in

paragraph 4.1.2A(a) or if a financial asset is eligible for the election in

paragraph 5.7.5 . For that purpose, an entity shall determine whether financial

assets meet the definition of held for trading as if the entity had purchased

the assets at the date of initial application.

Impairment

On transition, an entity should seek to approximate the credit risk on initial

recognition by considering all reasonable and supportable information that is

available without undue cost or effort. An entity is not required to undertake

an exhaustive search for information when determining, at the date of

transition, whether there have been significant increases in credit risk since

initial recognition. If an entity is unable to make this determination without

undue cost or effort paragraph 7.2.20 applies.

In order to determine the loss allowance on financial instruments initially

recognised (or loan commitments or financial guarantee contracts to which

the entity became a party to the contract) prior to the date of initial

application, both on transition and until the derecognition of those items an

entity shall consider information that is relevant in determining or

approximating the credit risk at initial recognition. In order to determine or

approximate the initial credit risk, an entity may consider internal and

external information, including portfolio information, in accordance with

paragraphs B5.5.1–B5.5.6.

An entity with little historical information may use information from internal

reports and statistics (that may have been generated when deciding whether

to launch a new product), information about similar products or peer group

experience for comparable financial instruments, if relevant.

Definitions (Appendix A)

Derivatives

Typical examples of derivatives are futures and forward, swap and option

contracts. A derivative usually has a notional amount, which is an amount of

currency, a number of shares, a number of units of weight or volume or other

units specified in the contract. However, a derivative instrument does not

require the holder or writer to invest or receive the notional amount at the

inception of the contract. Alternatively, a derivative could require a fixed

payment or payment of an amount that can change (but not proportionally

with a change in the underlying) as a result of some future event that isB7.2.1

B7.2.2

B7.2.3

B7.2.4

BA.1IFRS 9

unrelated to a notional amount. For example, a contract may require a fixed

payment of CU1,000 if six -month LIBOR increases by 100 basis points. Such a

contract is a derivative even though a notional amount is not specified.

The definition of a derivative in this Standard includes contracts that are

settled gross by delivery of the underlying item (eg a forward contract to

purchase a fixed rate debt instrument). An entity may have a contract to buy

or sell a non-financial item that can be settled net in cash or another financial

instrument or by exchanging financial instruments (eg a contract to buy or

sell a commodity at a fixed price at a future date). Such a contract is within

the scope of this Standard unless it was entered into and continues to be held

for the purpose of delivery of a non-financial item in accordance with the

entity’s expected purchase, sale or usage requirements. However, this

Standard applies to such contracts for an entity’s expected purchase, sale or

usage requirements if the entity makes a designation in accordance with

paragraph 2.5 (see paragraphs 2.4–2.7).

One of the defining characteristics of a derivative is that it has an initial net

investment that is smaller than would be required for other types of contracts

that would be expected to have a similar response to changes in market

factors. An option contract meets that definition because the premium is less

than the investment that would be required to obtain the underlying financial