ipsas 29—financial instruments: recognition and measurement - IFAC

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FINANCIAL INSTRUMENTS: RECOGNITION AND MEASUREMENT International Public Sector Accounting Standard 29, “Financial Instruments: Recognition and Measurement,” is set out in paragraphs 1–126. All the paragraphs have equal authority. IPSAS 29 should be read in the context of its objective, the Basis for Conclusions, and the “Preface to International Public Sector Accounting Standards.” IPSAS 3, “Accounting Policies, Changes in Accounting Estimates and Errors,” provides a basis for selecting and applying accounting policies in the absence of explicit guidance. 1025 IPSAS 29 PUBLIC SECTOR
Introduction FINANCIAL INSTRUMENTS: RECOGNITION AND MEASUREMENT IN1. IPSAS 29 prescribes recognition and measurement principles for financial instruments and is primarily drawn from IAS 39, “Financial Instruments: Recognition and Measurement” (as at December 31, 2008, including certain amendments published by the IASB as part of its “Improvements to IFRSs” issued in April 2009). Scope IN2. Financial instruments are contractual arrangements that result in a financial asset for one entity and a financial liability or equity instrument in another. Rights and obligation arising out of non-contractual arrangements, such as through the exercise of legislation or through constructive obligations, are not financial instruments. The recognition and measurement of rights and obligations arising out of these transactions are addressed in other IPSASs. IN3. Many contracts meet the definition of a “financial asset or a financial liability.” Some of these are accounted for either by using other IPSASs, or accounted for partly using other IPSASs and partly using IPSAS 29. Some examples include rights and obligations arising from employee benefits, lease receivables and finance lease payables. IN4. IPSAS 29 does not apply to insurance contracts, except certain financial guarantee contracts and embedded derivatives included in insurance contracts. An entity is however permitted to apply this Standard to insurance contracts that involve the transfer of financial risk. IN5. Commitments to provide credit under specified conditions (loan commitments) are excluded from the scope of this Standard, with three exceptions. Notably, commitments to provide a loan at a below market interest rate are within the scope of IPSAS 29. Most other loan commitments are accounted for using IPSAS 19, “Provisions, Contingent Liabilities and Contingent Assets.” IN6. IPSAS 29 applies to contracts for the purchase or sale of a non-financial item if the contract can be settled net in cash or another financial instrument, or by exchanging financial instruments. If the contracts were entered into and continue to be held for the purpose of the receipt or delivery of a non-financial item in accordance with an entity’s expected purchase, sale, or usage requirements, IPSAS 29 does not apply. Initial Recognition and Derecognition IN7. An entity recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. Regular way purchases of financial assets can either be recognized using trade or settlement date accounting, while derivatives are always recognized using trade date accounting. Regular way purchases of financial assets are contracts that involve IPSAS 29 1026
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ipsas 29—financial instruments: recognition and measurement - IFAC

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