1 Best Complete Read – Financial Instruments

Financial Instruments is a summary of the current (Financial Statements preparation for 2020 on wards) IFRS reporting requirements relating to the combination of IAS 32 Financial Instruments: Presentation, IFRS 7 Financial instruments: Disclosure and IFRS 9 Financial Instruments, into one overall narrative.

IFRS standards for Financial Instruments have a complicated history. It was originally intended that IFRS 9 would replace IAS 39 in its entirety. However, in response to requests from interested parties that the accounting for financial instruments be improved quickly, the project to replace IAS 39 was divided into three main phases.

The three main phases of the project to replace IAS 39 were:

  1. Phase 1: classification and measurement of financial assets and financial liabilities.
  2. Phase
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IFRS 17 Financial guarantee contract

Financial guarantee contract - IFRS 17 Definition: A contract that requires the issuer to make specified payments, to reimburse the holder for a loss it incurs.

Key performance indicator

Key Performance Indicator provides a focus for strategic improvement, create an analytical basis for decision making and help focus on what matters most.

Accounting Policies to First IFRS FS

Accounting Policies to First IFRS FS – An entity must use the same accounting policies in its opening IFRS statement of financial position and throughout all periods presented in its first IFRS financial statements. Those accounting policies must comply with each IFRSs effective at the end of its first IFRS reporting period, unless there is a mandatory exception to retrospective application or an optional exemption from the requirements of IFRSs.

[IFRS 1, paras 7 – 9]Accounting Policies to First IFRS FS

Note that:

  • An entity may apply a new IFRS that is not yet mandatory if that IFRSs permits early application.
  • The transitional provisions in IFRSs do not apply to a first-time adopter’s transition to IFRSs.

Mandatory Exceptions to Retrospective Application and Optional Exemptions from Read more

Hedge accounting

Hedge accounting If investors purchase a high level of risk security, they may want to reduce risk with an opposing item purchase referred to as a hedge

Main FS Statements Insurance contracts

Main FS Statements Insurance contracts – These examples of the main Financial Statements statements demonstrate the requirements in respect of presentation and disclosure according to IFRS 17 Insurance contracts. They also includeMain FS Statements Insurance contracts the requirements (introduced or amended) in respect of presentation and disclosure according to IFRS 9 Financial instruments and IFRS 7 Financial instruments: Disclosures.

It is prepared for illustrative purposes only and should be used in conjunction with the relevant financial reporting standards and any other reporting pronouncements and legislation applicable in specific jurisdictions. Main FS Statements Insurance contracts

Presentation of insurance service result Main FS Statements Insurance contracts

 

IFRS 17 83,
85,
B120 – B127

Clarifications:

Insurance revenue reflects the consideration to which the

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Sensitivity analysis to market risk

Sensitivity analysis to market risk – Companies are required to report both qualitatively and quantitatively on their risk management strategies and the internal metrics they use for the calculation and management of risk arising from financial instruments. Sensitivity analysis is a kind of stress test (banking term) with less radical assumptions.

 

IFRS 7 breaks down the risk arising from financial instruments into three broad categories: market risk, credit risk and liquidity risk.

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the company’s income or the value of its financial instruments. Example disclosures are as follows:

IFRS Link

Explanation Sensitivity analysis to market risk

IFRS 17

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Key differences between GM and VFA Insurance

Key differences between GM and VFA Insurance – The Variable Fee Approach (‘VFA’) is a modification of the General Model. The General Model is applied to insurance contracts without participation features or to insurance contracts with participation features that fail the Variable fee scope test. Thus, the VFA is applied to insurance contracts with direct participation features that contain the following conditions at initial recognition:

  1. the contractual terms specify that the policyholder participates in a share of a clearly identified pool of underlying items;Loan receivable classification and measurement
  2. the entity expects to pay to the policyholder an amount equal to a substantial share of the returns from the underlying items; and
  3. a substantial proportion of the cash flows the entity expects to pay to
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Insurances Classification and Measurement

Insurances Classification and Measurement – Introduction

(first part from https://en.wikipedia.org/wiki/Insurance) Insurances Classification and Measurement

Insurance is a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss.Insurances Classification and Measurement

An entity which provides insurance is known as an insurer, insurance company, insurance carrier or underwriter. A person or entity who buys insurance is known as an insured or as a policyholder. The insurance transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer’s promise to compensate the insured in the event of a covered loss.

The loss may or Read more