ipsas 29—financial instruments: recognition and measurement - IFAC

FINANCIAL INSTRUMENTS: RECOGNITION AND MEASUREMENT
AG37. Circumstances other than those described in paragraphs AG29–AG36 can
indicate that an entity does not have a positive intention or the ability to
hold an investment to maturity.
AG38. An entity assesses its intention and ability to hold its held-to-maturity
investments to maturity not only when those financial assets are initially
recognized, but also at the end of each subsequent reporting period.
Loans and Receivables
AG39. Any non-derivative financial asset with fixed or determinable payments
(including loan assets, receivables, investments in debt instruments and
deposits held in banks) could potentially meet the definition of loans and
receivables. However, a financial asset that is quoted in an active market
(such as a quoted debt instrument, see paragraph AG103) does not qualify
for classification as a loan or receivable. Financial assets that do not meet
the definition of loans and receivables may be classified as held-tomaturity
investments if they meet the conditions for that classification
(see paragraphs 10 and AG29–AG38). On initial recognition of a financial
asset that would otherwise be classified as a loan or receivable, an entity
may designate it as a financial asset at fair value through surplus or
deficit, or available for sale.
Embedded Derivatives (paragraphs 11–13)
AG40. If a host contract has no stated or predetermined maturity and represents a
residual interest in the net assets of an entity, then its economic
characteristics and risks are those of an equity instrument, and an
embedded derivative would need to possess characteristics of the net
assets/equity related to the same entity to be regarded as closely related. If
the host contract is not an equity instrument and meets the definition of a
financial instrument, then its economic characteristics and risks are those
of a debt instrument.
AG41. An embedded non-option derivative (such as an embedded forward or
swap) is separated from its host contract on the basis of its stated or
implied substantive terms, so as to result in it having a fair value of zero at
initial recognition. An embedded option-based derivative (such as an
embedded put, call, cap, floor, or swaption) is separated from its host
contract on the basis of the stated terms of the option feature. The initial
carrying amount of the host instrument is the residual amount after
separating the embedded derivative.
AG42. Generally, multiple embedded derivatives in a single instrument are treated as
a single compound embedded derivative. However, embedded derivatives that
are classified as equity instruments (see IPSAS 28) are accounted for
separately from those classified as assets or liabilities. In addition, if an
instrument has more than one embedded derivative and those derivatives
IPSAS 29 APPLICATION GUIDANCE 1080