International Financial Reporting Standard 9  
Financial Instruments

 

In April 2001 the International Accounting Standards Board (IASB) adopted IAS 39 Financial Instruments: Recognition and Measurement, which had originally been issued by the International Accounting Standards Committee in March 1999 The IASB intends to ultimately replace IAS 39 in its entirety. However, in response to requests from interested parties that the accounting for financial instruments should be improved quickly, the IASB divided its project to replace IAS 39 into phases. As the IASB completes each phase, it will replace portions of IAS 39 with chapters in IFRS 9

In November 2009, the IASB issued the chapters of IFRS 9 Financial Instruments relating to the classification and measurement of financial assets. In October 2010 the IASB added the requirements related to the classification and measurement of financial liabilities to IFRS 9. This includes requirements on embedded derivatives and how to account for own credit risks for financial liabilities that are measured at fair  In October 2010 the IASB also

decided to carry forward unchanged from IAS 39 the requirements related to the derecognition of financial assets and financial liabilities. Because of these changes, in October 2010 the IASB restructured IFRS 9 and its Basis for Conclusions. In December 2011 the IASB deferred the effective date to January 2015 In November 2013 the IASB added a Hedge Accounting chapter. It also removed the

mandatory effective date of IFRS 9. A new mandatory effective date is expected to be set when the revised classification and measurement proposals and the expected credit loss proposals are finalised Other IFRSs have made minor consequential amendments to IFRS 9. They include Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters (Amendments to IFRS 1) (issued December 2010), IFRS 10 Consolidated Financial Statements (issued May 2011), IFRS 11 Joint Arrangements (issued May 2011), IFRS 13 Fair Value Measurement (issued May 2011), IAS 19 Employee Benefits (issued June 2011), Mandatory Effective Date and Transition Disclosures (Amendments to IFRS 9 (2009), IFRS 9 (2010) and IFRS 7) (issued December 2011), Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) (issued October 2012) and Annual Improvements to IFRSs 2010-2012 Cycle (issued December 2013)

 

from paragraph

IN1

INTRODUCTION

INTERNATIONAL FINANCIAL REPORTING STANDARD 9

FINANCIAL INSTRUMENTS

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2.

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3.1

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4.1

1 .5

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1 6

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 7

1.1

CHAPTERS

1 OBJECTIVE

2 SCOPE

3 RECOGNITION AND DERECOGNITION

4 CLASSIFICATION 5 MEASUREMENT

6 HEDGE ACCOUNTING

7 EFFECTIVE DATE AND TRANSITION

APPENDICES

A Defined terms

B Application guidance

C Amendments to other IFRSs

 

International Financial Reporting Standard 9 Financial Instruments (IFRS 9) is set out in paragraphs 1.1-7.3.2 and Appendices A-C. This publication amends particular

paragraphs of IFRS 9 and adds Chapter 6. Paragraphs of IFRS 9 that are not included are not amended by this publication. All the paragraphs have equal authority. Paragraphs in bold type state the main principles. Terms defined in Appendix A are in italics the

first time they appear in the IFRS. Definitions of other terms are given in the Glossary for International Financial Reporting Standards. IFRS 9 should be read in the context of its objective and the Basis for Conclusions, the Preface to International Financial Reporting Standards and the Conceptual Framework for Financial Reporting. IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying accounting policies in the absence of explicit guidance

Introduction Reasons for issuing the IFRS

 39 Financial Instruments: Recognition and Measurement sets out the requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. The International Accounting Standards Board (IASB) inherited IAS 39 from its predecessor body, the International Accounting Standards Committee

Many users of financial statements and other interested parties told the IASB that the requirements in IAS 39 were difficult to understand, apply and interpret. They urged the IASB to develop a new Standard for the financial reporting of financial instruments that was principle-based and less complex. Although the IASB amended IAS 39 several times to clarify requirements, add guidance and eliminate internal inconsistencies, it had not previously undertaken a fundamental reconsideration of the reporting for financial instruments

In 2005 the IASB and the US national standard-setter, the Financial Accounting Standards Board (FASB), began working towards a long-term objective to improve and simplify the reporting for financial instruments. This work resulted in the publication of the Discussion Paper, Reducing Complexity in Reporting Financial Instruments, in March 2008. Focusing on the measurement of financial instruments and hedge accounting, the Discussion Paper identified several possible approaches for improving and simplifying the accounting for financial instruments. The responses to the Discussion Paper indicated support for a significant change in the requirements for reporting financial instruments. In November 2008 the IASB added this project to its active agenda, and in December 2008 the FASB also added the project to its agenda

In April 2009, in response to the feedback received on its work responding to the financial crisis, and following the conclusions of the G20 leaders and the recommendations of international bodies such as the Financial Stability Board, the IASB announced an accelerated timetable for replacing IAS 39. As a result, in July 2009 the IASB published the Exposure Draft Financial Instruments: Classification and Measurement, followed by the first chapter of IFRS 9 Financial Instruments in November 2009

The IASB's approach to replacing IAS 39

The IASB intends that IFRS 9 will ultimately replace IAS 39 in its entirety. However, in response to requests from interested parties that the accounting for financial instruments should be improved quickly, the IASB divided its project to replace IAS 39 into three main phases. As the IASB completes each phase, it will create chapters in IFRS 9 that will replace the corresponding requirements in IAS 39 The three main phases of the IASB's project to replace IAS 39 are

Phase 1: classification and measurement of financial assets and financial liabilities. In November 2009 the IASB issued the chapters of IFRS 9 relating to the classification and measurement of financial assets. In October 2010 the IASB added to IFRS 9 the requirements related to the classification and measurement of financial liabilities. Those additional requirements are described further in paragraph IN7. In November 2011 the IASB decided to consider limited modifications to the classification and measurement requirements. The IASB published in November 2012 the Exposure Draft Classification and Measurement: Limited Amendments to IFRS 9 (Proposed amendments to IFRS 9 (2010))

Phase 2: impairment methodology. In June 2009 the IASB published a Request for Information on the feasibility of an expected loss model for the impairment of financial assets. This formed the basis of the Exposure Draft Financial Instruments: Amortised Cost and Impairment published in November 2009 and the supplement to the Exposure Draft Financial Instruments: Impairment, published in January 2011. As the result of considering the feedback received on those documents, the IASB published in March 2013 the Exposure Draft Financial Instruments: Expected Credit Losses. The IASB is redeliberating the proposals in that Exposure Draft to address the comments received from respondents and the suggestions received from other outreach activities

Phase 3: hedge accounting

IFRS 9 the requirements related to hedge accounting. Those additional requirements are described further in paragraph IN8 In October 2010 the IASB added to IFRS 9 the requirements for the classification and measurement of financial liabilities. Most of the requirements in IAS 39 for the classification and measurement of financial liabilities were carried forward unchanged to IFRS 9. However, the requirements related to the fair value option for financial liabilities were changed to address own credit risk. Those improvements respond to consistent feedback from users of financial statements and others that the effects of changes in a liability's credit risk ought not to affect profit or loss unless the liability is held for trading. The improvements followed from the proposals published in May 2010 in the Exposure Draft Fair Value Option for Financial Liabilities. In November 2013 the IASB made the requirements in IFRS 9 that address own credit risk available more quickly by permitting those requirements to apply without applying the other requirements of IFRS 9 at the same time

In November 2013 the IASB added to IFRS 9 the requirements related to hedge accounting the IASB comprehensively reviewed the hedge accounting requirements

in IAS 39 and replaced them with the requirements in IFRS 9 the hedge accounting requirements in IFRS 9 align hedge accounting

more closely with risk management, resulting in more useful information to users of financial statements. The requirements also establish a more principle-based approach to hedge accounting and address inconsistencies and weaknesses in the hedge accounting model in IAS 39

the IASB did not address specific accounting for open portfolios or macro hedging as part of the general hedge accounting requirements in IFRS 9. The IASB is discussing proposals for accounting for open portfolios and macro hedging as part of its active agenda with the objective of issuing a Discussion Paper. Consequently, the IASB has not reconsidered the exception in IAS 39 for a fair value hedge of an interest rate exposure of a portfolio of financial assets or financial liabilities. That exception continues to apply (see paragraphs 81A, 89A and AG114-AG132 of IAS 39). The IASB also provided entities with an accounting policy choice between applying the hedge accounting requirements of IFRS 9 (ie Chapter 6, including the scope exception for fair value hedge accounting for a portfolio hedge of interest rate risk) and continuing to apply the existing hedge accounting requirements in IAS 39 for all hedge accounting because it had not yet completed its project on the accounting for macro hedging

In addition to the three phases, the IASB published, in March 2009, the Exposure Draft Derecognition (proposed amendments to IAS 39 and IFRS 7 Financial Instruments: Disclosures). However, in June 2010 the IASB revised its strategy and work plan and decided to retain the existing requirements in IAS 39 for the derecognition of financial assets and financial liabilities but to finalise improved disclosure requirements. Those new requirements were issued in October 2010 as an amendment to IFRS 7 and had an effective date of 1 July 2011. In October 2010 the requirements in IAS 39 for the derecognition of financial assets and financial liabilities were carried forward unchanged to IFRS 9

As a result of the added requirements described in paragraphs IN7 and IN9, IFRS 9 and its Basis for Conclusions (both as issued in 2009) were restructured. Many paragraphs were renumbered and some were re-sequenced. New paragraphs were added to accommodate the guidance that was carried forward unchanged from IAS 39. Also, new sections were added to IFRS 9 as placeholders for the guidance that will result from subsequent phases of this project. Otherwise, the restructuring did not change the requirements in IFRS 9 (2009). The Basis for Conclusions on IFRS 9 has been expanded to include material from the Basis for Conclusions on IAS 39 that discusses guidance that was carried forward without being reconsidered. Minor necessary edits have been made to that material

International Financial Reporting Standard 9 Financial Instruments  Chapter 1 Objective

 The objective of this IFRS is to establish principles for the financial reporting of financial assets and financial liabilities that will present relevant and useful information to users of financial statements for their assessment of the amounts, timing and uncertainty of an entity's future cash flows

Chapter 2 Scope

.1An entity shall apply this IFRS to all items within the scope of IAS 39 Financial  Instruments: Recognition and Measurement

Chapter 3 Recognition and derecognition 3.1 Initial recognitio  An entity shall recognise a financial asset or a financial liability in its statement of financial position when, and only when, the entity becomes party to the contractual provisions of the instrument (see paragraphs B3.1.1 and B3.1.2). When an entity first recognises a financial asset, it shall classify it in accordance with paragraphs 4.1.1-4.1.5 and measure it in accordance with paragraphs 5.1.1 and 5.1.2. When an entity first recognises a financial liability, it shall classify it in accordance with paragraphs 4.2.1 and 4.2.2 and measure it in accordance with paragraph 5.1.1 Regular way purchase or sale of financial asset  A regular way purchase or sale of financial assets shall be recognised and derecognised, as applicable, using trade date accounting or settlement date accounting (see paragraphs B3.1.3-B3.1.6)

In consolidated financial statements, paragraphs 3.2.2-3.2.9, B3.1.1, B3.1.2 and B3.2.1-B3.2.17 are applied at a consolidated level. Hence, an entity first consolidates all subsidiaries in accordance with IFRS 10 Consolidated Financial Statements and then applies those paragraphs to the resulting group

Before evaluating whether, and to what extent, derecognition is appropriate under paragraphs 3.2.3-3.2.9, an entity determines whether those paragraphs should be applied to a part of a financial asset (or a part of a group of similar financial assets) or a financial asset (or a group of similar financial assets) in its entirety, as follows

(a)       Paragraphs 3.2.3-3.2.9 are applied to a part of a financial asset (or a part of a group of similar financial assets) if, and only if, the part being considered for derecognition meets one of the following three conditions The part comprises only specifically identified cash flows

from a financial asset (or a group of similar financial assets). For example, when an entity enters into an interest rate strip whereby the counterparty obtains the right to the interest cash flows, but not the principal cash flows from a debt instrument, paragraphs 3.2.3-3.2.9 are applied to the interest cash flows The part comprises only a fully proportionate (pro rata)

share of the cash flows from a financial asset (or a group of similar financial assets). For example, when an entity enters into an arrangement whereby the counterparty obtains the rights to a 90 per cent share of all cash flows of a debt instrument, paragraphs 3.2.3-3.2.9 are applied to 90 per cent of those cash flows. If there is more than one counterparty, each counterparty is not required to have a proportionate share of the cash flows provided that the transferring entity has a fully proportionate share

The part comprises only a fully proportionate (pro rata) share of specifically identified cash flows from a financial asset (or a group of similar financial assets). For example, when an entity enters into an arrangement whereby the counterparty obtains the rights to a 90 per cent share of interest cash flows from a financial asset, paragraphs 3.2.3-3.2.9 are applied to 90 per cent of those interest cash

flows. If there is more than one counterparty, each  counterparty is not required to have a proportionate share of the specifically identified cash flows provided that the transferring entity has a fully proportionate share In all other cases, paragraphs 3.2.3-3.2.9 are applied to the financial asset in its entirety (or to the group of similar financial assets in their entirety). For example, when an entity transfers (i) the rights to the first or the last 90 per cent of cash collections from a financial asset (or a group of financial assets), or (ii) the rights to 90 per cent of the cash flows from a group of receivables

but provides a guarantee to compensate the buyer for any credit losses up to 8 per cent of the principal amount of the receivables, paragraphs 3.2.3-3.2.9 are applied to the financial asset (or a group of similar financial assets) in its entirety

In paragraphs 3.2.3-3.2.12, the term 'financial asset' refers to either a part of a financial asset (or a part of a group of similar financial assets) as identified in (a) above or, otherwise, a financial asset (or a group of similar financial assets) in its entirety  3.2.5and the transfer qualifies for derecognition in accordance with paragraph 3.2.6 it transfers the financial asset as set out in paragraphs 3.2.4 an (See paragraph 3.1.2 for regular way sales of financial assets.) 3.2.4        An entity transfers a financial asset if, and only if, it either transfers the contractual rights to receive the cash flows of the  financial asset 

retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients in an arrangement that meets the conditions in paragraph 3.2.5
When an entity retains the contractual rights to receive the cash flows of a financial asset (the 'original asset'), but assumes a contractual obligation to pay those cash flows to one or more entities (the 'eventual recipients'), the entity treats the transaction as a transfer of a financial asset if, and only if, all of the following three conditions are met

The entity has no obligation to pay amounts to the eventual recipients unless it collects equivalent amounts from the original asset. Short-term advances by the entity with the right of full recovery of the amount lent plus accrued interest at market rates do not violate this condition The entity is prohibited by the terms of the transfer contract from selling or pledging the original asset other than as security to the eventual recipients for the obligation to pay them cash flows

The entity has an obligation to remit any cash flows it collects on behalf of the eventual recipients without material delay. In addition, the entity is not entitled to reinvest such cash flows, except for investments in cash or cash equivalents (as defined in IAS 7 Statement of Cash Flows) during the short settlement period  from the collection date to the date of required remittance to the

eventual recipients, and interest earned on such investments is passed to the eventual recipients 3.2.6  When an entity transfers a financial asset (see paragraph 3.2.4), it shal  evaluate the extent to which it retains the risks and rewards of ownership  of the financial asset. In this case

if the entity transfers substantially all the risks and rewards of ownership of the financial asset, the entity shall derecognise the financial asset and recognise separately as assets or liabilities any rights and obligations created or retained in the transfer if the entity retains substantially all the risks and rewards of ownership of the financial asset, the entity shall continue to recognise the financial asset

 if the entity neither transfers nor retains substantially all the risks  and rewards of ownership of the financial asset, the entity shall determine whether it has retained control of the financial asset In this case if the entity has not retained control, it shall derecognin the financial asset and recognise separately as assets or liabilities any rights and obligations created or retained in the transfer

 if the entity has retained control, it shall continue to  recognise the financial asset to the extent of its continuing involvement in the financial asset (see paragraph 3.2.16)

The transfer of risks and rewards (see paragraph 3.2.6) is evaluated by comparing the entity's exposure, before and after the transfer, with the variability in the amounts and timing of the net cash flows of the transferred asset. An entity has retained substantially all the risks and rewards of ownership of a financial asset if its exposure to the variability in the present value of the future net cash flows from the financial asset does not change significantly as a result of the transfer (eg because the entity has sold a financial asset subject to an agreement to buy it back at a fixed price or the sale price plus a lender's return). An entity has transferred substantially all the risks and rewards of ownership of a financial asset if its exposure to such variability is no longer significant in relation to the total variability in the present value of the future net cash flows associated with the financial asset (eg because the entity has sold a financial asset subject only to an option to buy it back at its fair value at the time of repurchase or hastransferred a fully proportionate share of the cash flows from a larger financial asset in an arrangement, such as a loan sub-participation, that meets the conditions in paragraph 3.2.5

Often it will be obvious whether the entity has transferred or retained substantially all risks and rewards of ownership and there will be no need to perform any computations. In other cases, it will be necessary to compute and compare the entity's exposure to the variability in the present value of the future net cash flows before and after the transfer. The computation and comparison are made using as the discount rate an appropriate current market interest rate. All reasonably possible variability in net cash flows is considered, with greater weight being given to those outcomes that are more likely to occur

Whether the entity has retained control (see paragraph 3.2.6(c)) of the transferred asset depends on the transferee's ability to sell the asset. If the transferee has the practical ability to sell the asset in its entirety to an unrelated third party and is able to exercise that ability unilaterally and without needing to impose additional restrictions on the transfer, the entity has not retained control. In all other cases, the entity has retained control

Transfers that qualify for derecognition If an entity transfers a financial asset in a transfer that qualifies fo  derecognition in its entirety and retains the right to service the financial asset for a fee, it shall recognise either a servicing asset or a servicing liability for that servicing contract. If the fee to be received is no

If, as a result of a transfer, a financial asset is derecognised in its entirety but the transfer results in the entity obtaining a new financial asset or assuming a new financial liability, or a servicing liability, the entity shall recognise the new financial asset, financial liability or servicing liability at fair value On derecognition of a financial asset in its entirety, the differencebetween

(a) the carrying amount (measured at the date of derecognition) and (b)the consideration received (including any new asset obtained less  any new liability assumed shall be recognised in profit or loss

If the transferred asset is part of a larger financial asset (eg when an entity transfers interest cash flows that are part of a debt instrument, see paragraph 3.2.2(a)) and the part transferred qualifies for derecognition in its entirety, the previous carrying amount of the larger financial asset shall be allocated between the part that continues to be recognised and the part that is derecognised, on the basis of the relative fair values of those parts on the date of the transfer. For this purpose, a retained servicing asset shall be treated as a part that continues to be recognised  The difference between

the carrying amount (measured at the date of derecognition)  allocated to the part derecognised and

the consideration received for the part derecognised (including any new asset obtained less any new liability assume) shall be recognised in profit or loss

When an entity allocates the previous carrying amount of a larger financial asset between the part that continues to be recognised and the part that is derecognised, the fair value of the part that continues to be recognised needs to be measured. When the entity has a history of selling parts similar to the part that continues to be recognised or other market transactions exist for such parts, recent prices of actual transactions provide the best estimate of its fair value. When there are no price quotes or recent market transactions to support the fair value of the part that continues to be recognised, the best estimate of the fair value is the difference between the fair value of the larger financial asset as a whole and the consideration received from the transferee for the part that is derecognised

Transfers that do not qualify for derecognition If a transfer does not result in derecognition because the entity has  retained substantially all the risks and rewards of ownership of the transferred asset, the entity shall continue to recognise the transferred asset in its entirety and shall recognise a financial liability for the consideration received. In subsequent periods, the entity shall recognise any income on the transferred asset and any expense incurred on the financial liability

Continuing involvement in transferred assets If an entity neither transfers nor retains substantially all the risks and rewards of ownership of a transferred asset, and retains control of the transferred asset, the entity continues to recognise the transferred asset to the extent of its continuing involvement The extent of the entity's continuing involvement in the transferred asset is the extent to which it is exposed to changes in the value of the transferred asset. For example
When the entity's continuing involvement takes the form of guaranteeing the transferred asset, the extent of the entity's continuing involvement is the lower of (i) the amount of the asset and (ii) the maximum amount of the consideration received that  the entity could be required to repay ('the guarantee amount')

When the entity's continuing involvement takes the form of a written or purchased option (or both) on the transferred asset, the extent of the entity's continuing involvement is the amount of the transferred asset that the entity may repurchase. However, in the case of a written put option on an asset that is measured at fair value, the extent of the entity's continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price (see paragraph B3.2.13)

When the entity's continuing involvement takes the form of a cash-settled option or similar provision on the transferred asset, the extent of the entity's continuing involvement is measured in the same way as that which results from non-cash settled options as set out in (b) above
When an entity continues to recognise an asset to the extent of its continuing involvement, the entity also recognises an associated liability. Despite the other measurement requirements in this IFRS, the transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the entity has retained. The associated liability is measured in such a way that the net carrying amount of the transferred asset and the associated liability is the amortised cost of the rights and obligations retained by the

entity, if the transferred asset is measured at amortised cost, or equal to the fair value of the rights and obligations retained by the entity when measured on a stand-alone basis, if the transferred asset is measured at fair value The entity shall continue to recognise any income arising on the transferred asset to the extent of its continuing involvement and shall recognise any expense incurred on the associated liability For the purpose of subsequent measurement, recognised changes in the fair value of the transferred asset and the associated liability are accounted for consistently with each other in accordance with paragraph 5.7.1, and shall not be offset

If an entity's continuing involvement is in only a part of a financial asset (eg when an entity retains an option to repurchase part of a transferred asset, or retains a residual interest that does not result in the retention of substantially all the risks and rewards of ownership and the entity retains control), the entity allocates the previous carrying amount of the financial asset between the part it continues to recognise under continuing involvement, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. For this purpose, the requirements of paragraph 3.2.14 apply. The difference between

the carrying amount (measured at the date of derecognition)

(the consideration received for the part no longer recognised

shall be recognised in profit or loss If the transferred asset is measured at amortised cost, the option in this IFRS to designate a financial liability as at fair value through profit or loss is not applicable to the associated liability

All transfers If a transferred asset continues to be recognised, the asset and the  associated liability shall not be offset. Similarly, the entity shall not offset any income arising from the transferred asset with any expense incurred on the associated liability (see IAS 32 Financial Instruments: Presentation paragraph 42)

If a transferor provides non-cash collateral (such as debt or equity instruments) to the transferee, the accounting for the collateral by the transferor and the transferee depends on whether the transferee has the right to sell or repledge the collateral and on whether the transferor has defaulted. The transferor and transferee shall account for the collateral as follows

If the transferee has the right by contract or custom to sell or repledge the collateral, then the transferor shall reclassify that asset in its statement of financial position (eg as a loaned asset, pledged equity instruments or repurchase receivable) separately from other assets

If the transferee sells collateral pledged to it, it shall recognise the proceeds from the sale and a liability measured at fair value for its obligation to return the collateral

If the transferor defaults under the terms of the contract and is no longer entitled to redeem the collateral, it shall derecognise the collateral, and the transferee shall recognise the collateral as its asset initially measured at fair value or, if it has already sold the collateral, derecognise its obligation to return the collateral

Except as provided in (c), the transferor shall continue to carry the collateral as its asset, and the transferee shall not recognise the collateral as an asset Derecognition of financial liabilitie

An entity shall remove a financial liability (or a part of a financial liability) from its statement of financial position when, and only when, it is extinguished—ie when the obligation specified in the contract is discharged or cancelled or expires

An exchange between an existing borrower and lender of debt instruments with substantially different terms shall be accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, a substantial modification of the terms of an existing financial liability or a part of it (whether or not attributable to the financial difficulty of the debtor) shall be accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability

The difference between the carrying amount of a financial liability (or part of a financial liability) extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, shall be recognised in profit or loss

If an entity repurchases a part of a financial liability, the entity shall allocate the previous carrying amount of the financial liability between the part that continues to be recognised and the part that is derecognised based on the relative fair values of those parts on the date of the repurchase. The difference between (a) the carrying amount allocated to the part derecognised and (b) the consideration paid, including any non-cash assets transferred or liabilities assumed, for the part derecognised shall be recognised in profit or loss

Chapter 4 Classification Classification of financial asset  Unless paragraph 4.1.5 applies, an entity shall classify financial  subsequently measured at either amortised cost or fair value on the basis  of both

(a)the entity's business model for managing the financial assets and

(b)the contractual cash flow characteristics of the financial asset

A financial asset shall be measured at amortised cost if both of the  following conditions are met The asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows The contractual terms of the financial asset give rise on specified  dates to cash flows that are solely payments of principal and interest on the principal amount outstanding
Paragraphs B4.1.1-B4.1.26 provide guidance on how to apply these conditions

For the purpose of applying paragraph 4.1.2(b), interest is consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time A financial asset shall be measured at fair value unless it is measured at amortised cost in accordance with paragraph 4.1.2 Option to designate a financial asset at fair value  through profit or loss

Despite paragraphs 4.1.1-4.1.4, an entity may, at initial recognition irrevocably designate a financial asset as measured at fair value through profit or loss if doing so eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as an 'accounting mismatch') that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases (see paragraphs B4.1.29-B4.1.32)

 An entity shall classify all financial liabilities as subsequently measured  at amortised cost using the effective interest method, except for financial liabilities at fair value through profit or loss. Such liabilities, including derivatives that are liabilities, shall be  subsequently measured at fair value

 financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies. Paragraphs 3.2.15 and 3.2.17 apply to the measurement of such financial liabilities

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