ipsas 29—financial instruments: recognition and measurement - IFAC

FINANCIAL INSTRUMENTS: RECOGNITION AND MEASUREMENT
B.20 Definition of Held-to-Maturity Investments: Application of the “Tainting”
Rule on Consolidation
Can an entity apply the conditions in IPSAS 29.10 separately to held-to-maturity
financial assets held by different entities in an economic entity, for example, if
separate entities are in different countries with different legal or economic
environments?
No. If an entity has sold or reclassified more than an insignificant amount of investments
classified as held-to-maturity in the consolidated financial statements, it cannot classify
any financial assets as held-to-maturity financial assets in the consolidated financial
statements unless the conditions in IPSAS 29.10 are met.
B.21 Definition of Loans and Receivables: Equity Instrument
Can an equity instrument, such as a preference share, with fixed or determinable
payments be classified within loans and receivables by the holder?
Yes. If a non-derivative equity instrument would be recorded as a liability by the issuer,
and it has fixed or determinable payments and is not quoted in an active market, it can be
classified within loans and receivables by the holder, provided the definition is otherwise
met. IPSAS 27.13–IPSAS 27.27 provide guidance about the classification of a financial
instrument as a liability or as an equity instrument from the perspective of the issuer of a
financial instrument. If an instrument meets the definition of an equity instrument under
IPSAS 28, it cannot be classified within loans and receivables by the holder.
B.22 Definition of Loans and Receivables: Banks’ Deposits in Other Banks
Banks make term deposits with a central bank or other banks. Sometimes, the
proof of deposit is negotiable, sometimes not. Even if negotiable, the depositor bank
may or may not intend to sell it. Would such a deposit fall within loans and
receivables under IPSAS 29.10?
Such a deposit meets the definition of loans and receivables, whether or not the proof of
deposit is negotiable, unless the depositor bank intends to sell the instrument immediately
or in the near term, in which case the deposit is classified as a financial asset held for
trading.
B.23 Definition of Amortized Cost: Perpetual Debt Instruments with Fixed or
Market-Based Variable Rate
Sometimes entities purchase or issue debt instruments that are required to be
measured at amortized cost and in respect of which the issuer has no obligation to
repay the principal amount. Interest may be paid either at a fixed rate or at a
variable rate. Would the difference between the initial amount paid or received and
zero (“the maturity amount”) be amortized immediately on initial recognition for
the purpose of determining amortized cost if the rate of interest is fixed or specified
as a market-based variable rate?
IPSAS 29 IMPLEMENTATION GUIDANCE 1168