ipsas 29—financial instruments: recognition and measurement - IFAC

FINANCIAL INSTRUMENTS: RECOGNITION AND MEASUREMENT
assets/equity. In that case, the amounts recognized in net assets/equity are recognized
in surplus or deficit when the hedged future cash flows occur or on the disposal of
the net investment, as appropriate. Under IPSAS 29.84(b), the interest element (time
value) of the fair value of a forward may be excluded from the designated hedge
relationship. In that case, changes in the interest element portion of the fair value of
the forward exchange contract are recognized in surplus or deficit.
F.6.5 IPSAS 29 and IPSAS 4 Fair Value Hedge of Asset Measured at
Cost
If the future sale of a ship carried at historical cost is hedged against the
exposure to currency risk by foreign currency borrowing, does IPSAS 29
require the ship to be remeasured for changes in the exchange rate even though
the basis of measurement for the asset is historical cost?
No. In a fair value hedge, the hedged item is remeasured. However, a foreign
currency borrowing cannot be classified as a fair value hedge of a ship since a ship
does not contain any separately measurable foreign currency risk. If the hedge
accounting conditions in IPSAS 29.98 are met, the foreign currency borrowing may
be classified as a cash flow hedge of an anticipated sale in that foreign currency. In a
cash flow hedge, the hedged item is not remeasured.
Section G: Other
G.1 Disclosure of Changes in Fair Value
IPSAS 29 requires financial assets classified as available-for-sale (AFS) and
financial assets and financial liabilities at fair value through surplus or deficit to
be remeasured to fair value. Unless a financial asset or a financial liability is
designated as a cash flow hedging instrument, fair value changes for financial
assets and financial liabilities at fair value through surplus or deficit are
recognized in surplus or deficit, and fair value changes for AFS assets are
recognized in net assets/equity. What disclosures are required regarding the
amounts of the fair value changes during a reporting period?
IPSAS 30.23 requires items of revenue, expense and gains and losses to be disclosed.
This disclosure requirement encompasses items of revenue, expense and gains and
losses that arise on remeasurement to fair value. Therefore, an entity provides
disclosures of fair value changes, distinguishing between changes that are recognized
in surplus or deficit and changes that are recognized in net assets/equity. Further
breakdown is provided of changes that relate to:
(a) AFS assets, showing separately the amount of gain or loss recognized in net
assets/equity during the period and the amount that was recognized in surplus
for deficit for the period;
(b) Financial assets or financial liabilities at fair value through surplus or deficit,
showing separately those fair value changes on financial assets or financial
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IPSAS 29 IMPLEMENTATION GUIDANCE
PUBLIC SECTOR