text
stringlengths 1
109
|
---|
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 |
Subsets and Splits