ipsas 29—financial instruments: recognition and measurement - IFAC

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FINANCIAL INSTRUMENTS: RECOGNITION AND MEASUREMENT entity X almost obsolete. This resulted in a permanent decline in the value of listed entity X. The value of the impairment loss as at December 31, 20X9 is CU700,000. Entity A has a policy of accounting for investments in shares as an available-for-sale financial asset. Assume that the arrangement is a contractual arrangement, no present obligations arise from the donation and that the entity’s reporting period ends on December 31, 20X8. Analysis IE48. As entity A received the shares as a donation, it uses IPSAS 23 to initially recognize the shares acquired and the related non-exchange revenue. However, because entity A has acquired a financial asset, it considers the initial measurement requirements of IPSAS 23 and IPSAS 29. IE49. IPSAS 23 prescribes that assets acquired as part of a non-exchange revenue transaction are initially measured at fair value, while IPSAS 29 prescribes that financial assets are initially measured at fair value and, depending on their classification, transaction costs may or may not be included. As the entity has a policy of accounting for investments in shares as available-for-sale financial assets, the transaction costs of CU10,000 are added to the value of the shares of CU1,000,000 on initial measurement. IE50. The subsequent measurement and derecognition of the shares is addressed in IPSAS 29. The entity classifies investments in shares as available-for-sale financial assets which means that the shares are measured at a fair value with any subsequent changes in fair value recognized in net assets/equity. Impairment losses are however recognized in surplus or deficit in the period in which they occur. The journal entries at initial acquisition and at the reporting dates are as follows: 1. Acquisition of shares through donation Dr Available-for-sale financial asset (investment in entity X) 1,010,000 Cr Non-exchange revenue 1,000,000 Cr Bank (Transfer costs paid) 10,000 2. Subsequent measurement at December 31, 20X8 Dr Net assets/equity (fair value adjustment of investment) Cr Available-for-sale financial asset (investment in entity X) 1285 110,000 110,000 3. Subsequent measurement at December 31, 20X9 Dr Impairment loss (surplus or deficit) 700,000 Cr Available-for-sale financial asset 700,000 IPSAS 29 ILLUSTRATIVE EXAMPLES PUBLIC SECTOR
FINANCIAL INSTRUMENTS: RECOGNITION AND MEASUREMENT Comparison with IAS 39 IPSAS 29, “Financial Instruments: Recognition and Measurement” is drawn primarily from IAS 39, “Financial Instruments: Recognition and Measurement” (including amendments up to December 31, 2008 as well as amendments made by the IASB to IAS 39 as part of its “Improvements to IFRSs” in April 2009). The main differences between IPSAS 29 and IAS 39 are as follows: • IPSAS 29 contains additional application guidance to deal with concessionary loans and financial guarantee contracts entered into at nil or nominal consideration. IAS 39 does not deal with these areas. • In certain instances, IPSAS 29 uses different terminology from IAS 39. The most significant examples are the use of the terms “statement of financial performance” and “net assets/equity.” The equivalent terms in IAS 39 are “statement of comprehensive income or separate income statement (if presented)” and “equity.” • IPSAS 29 does not distinguish between “revenue” and “income.” IAS 39 distinguishes between “revenue and “income,” with “income” having a broader meaning than the term “revenue.” • Principles from IFRIC 9, “Reassessment of Embedded Derivatives” and IFRIC 16 “Hedges of a Net Investment in a Foreign Operation” have been included as authoritative appendices to IPSAS 29. The IASB issues IFRICs as separate documents. IPSAS 29 COMPARISON WITH IAS 39 1286
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IPSAS 29—FINANCIAL INSTRUMENTS: R
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FINANCIAL INSTRUMENTS: RECOGNITION
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ipsas 29—financial instruments: recognition and measurement - IFAC

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