ipsas 29—financial instruments: recognition and measurement - IFAC
ipsas 29—financial instruments: recognition and measurement - IFAC
ipsas 29—financial instruments: recognition and measurement - IFAC
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FINANCIAL INSTRUMENTS: RECOGNITION AND MEASUREMENT<br />
to be received is recognized on the trade date as described in IPSAS 29.AG70. In<br />
that case, the entity recognizes a liability of an amount equal to the carrying amount<br />
of the financial asset to be delivered on settlement date.<br />
To illustrate: on December 29, 20X2 (trade date) Entity A enters into a contract to<br />
sell Note Receivable A, which is carried at amortized cost, in exchange for Bond B,<br />
which will be classified as held for trading <strong>and</strong> measured at fair value. Both assets<br />
have a fair value of CU1,010 on December, 29, while the amortized cost of Note<br />
Receivable A is CU1,000. Entity A uses settlement date accounting for loans <strong>and</strong><br />
receivables <strong>and</strong> trade date accounting for assets held for trading. On December 31,<br />
20X2 (financial year-end), the fair value of Note Receivable A is CU1,012 <strong>and</strong> the<br />
fair value of Bond B is CU1,009. On January, 4 20X3, the fair value of Note<br />
Receivable A is CU1,013 <strong>and</strong> the fair value of Bond B is CU1,007. The following<br />
entries are made:<br />
December 29, 20X2<br />
Dr Bond B CU1,010<br />
Cr Payable CU1,010<br />
December 31, 20X2<br />
Dr Trading loss CU1<br />
Cr Bond B CU1<br />
January 4, 20X3<br />
Dr Payable CU1,010<br />
Dr Trading loss CU2<br />
Cr Note Receivable A CU1,000<br />
Cr Bond B CU2<br />
Cr Realization gain CU10<br />
Section E: Measurement<br />
E.1 Initial Measurement of Financial Assets <strong>and</strong> Financial Liabilities<br />
E.1.1 Initial Measurement: Transaction Costs<br />
Transaction costs should be included in the initial <strong>measurement</strong> of financial assets<br />
<strong>and</strong> financial liabilities other than those at fair value through surplus or deficit.<br />
How should this requirement be applied in practice?<br />
For financial assets, incremental costs that are directly attributable to the acquisition<br />
of the asset, for example fees <strong>and</strong> commissions, are added to the amount originally<br />
recognized. For financial liabilities, directly related costs of issuing debt are<br />
deducted from the amount of debt originally recognized. For financial <strong>instruments</strong><br />
that are measured at fair value through surplus or deficit, transaction costs are not<br />
added to the fair value <strong>measurement</strong> at initial <strong>recognition</strong>.<br />
IPSAS 29 IMPLEMENTATION GUIDANCE 1184