Embedded derivatives best 1 to read

Embedded derivatives are a component of a hybrid contract that also includes a non-derivative host, so some cash flows vary similar to a stand alone derivative

11 Best fair value measurements under IFRS 13

11 Best fair value measurements under IFRS 13

Several IFRS standards provide guidance regarding the scope and application of the fair value option for assets and liabilities. Here they are from 1 to 11…….

1 Investments in associates and joint ventures

Investments held by venture capital organizations and the like are exempt from IAS 28’s requirements only when they are measured at fair value through profit or loss (FVPL) in accordance with IFRS 9. Changes in the fair value (FV) of such investments are recognized in profit or loss in the period of change.

The IASB acknowledged that FV information is often readily available in venture capital organizations and entities in similar industries, even for start-up and non-listed entities, as the methods and basis for fair value measurement are well established. The IASB also confirmed that the reference to well-established practice is to emphasize that the exemption applies generally to those investments for which fair value is readily available.

2 Intangible assets

Subsequent to initial recognition of intangible assets, an entity may adopt either the cost model or the revaluation model as its accounting policy. The policy should be applied to the whole of a class of intangible assets and not merely to individual assets within a class11 Best fair value measurements under IFRS 13, unless there is no active market for an individual asset.

The revaluation model may only be adopted if the intangible assets are traded in an active market; hence it is not frequently used. Further, the revaluation model may not be applied to intangible assets that have not previously been recognized as assets. For example, over the years an entity might have accumulated for nominal consideration a number of licenses of a kind that are traded on an active market. 11 Best fair value measurements under IFRS 13

The entity may not have recognized an intangible asset as the licenses were individually immaterial when acquired. If market prices for such licenses significantly increased, the value of the licenses held by the entity would substantially increase. In this case, the entity would be prohibited by IAS 38 from applying the revaluation model to the licenses, because they were not previously recognized as an asset.

Read more

Accounting policies for financial instruments

Accounting policies for financial instruments – a quite complete overview of all kinds of accounting issues for financial instruments such as measurement categories, initial recognition, amortised costs and effective interest rate, financial assets, impairment, derecognition, financial liabilities, derecognition, and derivatives. Enjoy it!

Summary of significant financial instruments accounting policies

1 Financial assets and liabilities

1.1 Summary of measurement categories

The insurer classifies its financial assets into the following categories:

Business model and cash flow characteristics

Type of financial instruments

Classification

Hold to collect business model and solely payments of principal and interest

Cash and cash equivalents

Amortised cost (AC)

Hold to collect and sell business model and solely payments of principal and interest

Government bonds

Fair value through other

Read more

Hold to collect – How 2 best account it in IFRS 9 classification of financial assets

The objective of the ‘hold to collect’ business model is to hold financial assets to collect their contractual cash flows, rather than to selling the assets

Hold to collect and sell – How 2 best account it in IFRS 9 classification of financial assets

Under the 'hold to collect and sell’ business model, the objective is to both collect the contractual cash flows and sell the financial asset for cash

Consolidated financial statements

The financial statements of a group in which the assets, liabilities, equity, income, expenses and cash flows of the parent and its subsidiaries are presented as those of a single economic entity. The detailed ‘mechanics’ of the consolidation process vary from one group to another, depending on the group’s structure, history and financial reporting systems. IFRS 10 and much of the literature on consolidation are based on a traditional approach to consolidation under which the financial statements (or, more commonly in practice, group ‘reporting packs’) of group entities are aggregated and then adjusted on each reporting date.

Fair value through profit or loss

Financial assets measured at fair value through profit or loss 2. This is part of the classification of financial assets, representing the remaining or designated class of financial assets.

IFRS 9 Classification of financial assets

Classification of financial assets , at fair value through other comprehensive income (FVOCI) or Read more

IFRS 9 Classification and Measurement of Financial Instruments

IFRS 9 Classification and – IFRS 9 uses the following criteria for determining the classification as of financial assets , … Read more

Loan receivable classification and measurement

Loan receivable classification and measurement – Once it has been determined that a loan receivable is within the scope of IFRS 9, it must be classified into one of three categories:

  1. Amortised cost; Loan receivable classification and measurement
  2. Fair Value through Profit or Loss (FVPL); or Loan receivable classification and measurement
  3. Fair Value through Other Comprehensive Income (FVOCI).

The classification decision is based on (i) the business model within which the loan is held and (ii) whether its contractual cash flows meet the ‘solely payments of principal and interest’ (SPPI) test, as illustrated below:

Business model >  Hold to collect Hold to collect and sell Other
Cash Flow Characteristic SPPI Amortised costs FVOCI Read more