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 />
(a) Although a financial guarantee contract meets the definition of an<br />
insurance contract if the risk transferred is significant, the issuer<br />
applies this St<strong>and</strong>ard. Nevertheless, an entity may elect, under<br />
certain circumstances, to treat financial guarantee contracts as<br />
insurance contracts of financial <strong>instruments</strong> using IPSAS 28 if the<br />
issuer has previously adopted an accounting policy that treated<br />
financial guarantee contracts as insurance contracts <strong>and</strong> has used<br />
accounting applicable to insurance contracts, the issuer may elect<br />
to apply either this St<strong>and</strong>ard or the relevant international or<br />
national accounting st<strong>and</strong>ard on insurance contracts to such<br />
financial guarantee contracts. If this St<strong>and</strong>ard applies paragraph 45<br />
requires the issuer to recognize a financial guarantee contract<br />
initially at fair value. If the financial guarantee contract was issued<br />
to an unrelated party in a st<strong>and</strong>-alone arm’s length transaction, its<br />
fair value at inception is likely to equal the premium received,<br />
unless there is evidence to the contrary. Subsequently, unless the<br />
financial guarantee contract was designated at inception as at fair<br />
value through surplus or deficit or unless paragraphs 31–39 <strong>and</strong><br />
AG62–67 apply (when a transfer of a financial asset does not<br />
qualify for de<strong>recognition</strong> or the continuing involvement approach<br />
applies), the issuer measures it at the higher of:<br />
(i) The amount determined in accordance with IPSAS 19; <strong>and</strong><br />
(ii) The amount initially recognized less, when appropriate,<br />
cumulative amortization recognized in accordance with<br />
IPSAS 9 (see paragraph 49(c)).<br />
(b) Some credit-related guarantees do not, as a precondition for payment,<br />
require that the holder is exposed to, <strong>and</strong> has incurred a loss on, the<br />
failure of the debtor to make payments on the guaranteed asset when<br />
due. An example of such a guarantee is one that requires payments in<br />
response to changes in a specified credit rating or credit index. Such<br />
guarantees are not financial guarantee contracts, as defined in this<br />
St<strong>and</strong>ard, <strong>and</strong> are not insurance contracts. Such guarantees are<br />
derivatives <strong>and</strong> the issuer applies this St<strong>and</strong>ard to them.<br />
(c) If a financial guarantee contract was issued in connection with the sale<br />
of goods, the issuer applies IPSAS 9 in determining when it recognizes<br />
the revenue from the guarantee <strong>and</strong> from the sale of goods.<br />
AG5. Some contracts require a payment based on climatic, geological or other<br />
physical variables. (Those based on climatic variables are sometimes<br />
referred to as “weather derivatives”). If those contracts are not insurance<br />
contracts, they are within the scope of this St<strong>and</strong>ard.<br />
1069<br />
IPSAS 29 APPLICATION GUIDANCE<br />
PUBLIC SECTOR