ipsas 29—financial instruments: recognition and measurement - IFAC

FINANCIAL INSTRUMENTS: RECOGNITION AND MEASUREMENT
selling the transferred asset, then the transferor has retained control of the
transferred asset. For example, if a put option or guarantee is sufficiently
valuable it constrains the transferee from selling the transferred asset
because the transferee would, in practice, not sell the transferred asset to a
third party without attaching a similar option or other restrictive
conditions. Instead, the transferee would hold the transferred asset so as to
obtain payments under the guarantee or put option. Under these
circumstances the transferor has retained control of the transferred asset.
Transfers that Qualify for Derecognition
AG60. An entity may retain the right to a part of the interest payments on
transferred assets as compensation for servicing those assets. The part of
the interest payments that the entity would give up upon termination or
transfer of the servicing contract is allocated to the servicing asset or
servicing liability. The part of the interest payments that the entity would
not give up is an interest-only strip receivable. For example, if the entity
would not give up any interest upon termination or transfer of the
servicing contract, the entire interest spread is an interest-only strip
receivable. For the purposes of applying paragraph 29, the fair values of
the servicing asset and interest-only strip receivable are used to allocate
the carrying amount of the receivable between the part of the asset that is
derecognized and the part that continues to be recognized. If there is no
servicing fee specified or the fee to be received is not expected to
compensate the entity adequately for performing the servicing, a liability
for the servicing obligation is recognized at fair value.
AG61. In estimating the fair values of the part that continues to be recognized
and the part that is derecognized for the purposes of applying paragraph
29, an entity applies the fair value measurement requirements in
paragraphs 50–52 and AG101–AG115 in addition to paragraph 30.
Transfers that do not Qualify for Derecognition
AG62. The following is an application of the principle outlined in paragraph 31.
If a guarantee provided by the entity for default losses on the transferred
asset prevents a transferred asset from being derecognized because the
entity has retained substantially all the risks and rewards of ownership of
the transferred asset, the transferred asset continues to be recognized in its
entirety and the consideration received is recognized as a liability.
Continuing Involvement in Transferred Assets
AG63. The following are examples of how an entity measures a transferred asset
and the associated liability under paragraph 32.
IPSAS 29 APPLICATION GUIDANCE 1090