ipsas 29—financial instruments: recognition and measurement - IFAC

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FINANCIAL INSTRUMENTS: RECOGNITION AND MEASUREMENT the exchange of the underlying instrument within a time frame established in the marketplace concerned. IN8. An entity derecognizes regular way purchases and sales of financial assets either using trade or settlement date accounting. Financial assets are derecognized using the following steps: • Consolidate all controlled entities and special purpose entities. • Determine whether the derecognition principles are applied to an asset as a whole, or to a part of an asset. • Assess whether the rights to the cash flows have expired. • Assess whether the rights to receive the cash flows have been transferred to another party. • Assess whether an obligation has been assumed to pay the cash flows from the asset to another party. • Assess whether the entity has transferred substantially all the risks and rewards of ownership to another party. • If substantially all the risks and rewards of ownership have not been transferred to another party, assess whether control has been retained. IN9. A financial liability is derecognized when the liability has been extinguished. An existing liability is derecognized and a new liability recognized when: (a) An entity exchanges debt instruments with another entity, and the terms of the instruments are substantially different; and (b) The terms of an existing debt instrument are substantially modified. When an entity has its debt waived, an entity considers the requirements in this Standard along with the requirements in IPSAS 23, “Revenue from Non- Exchange Transactions (Taxes and Transfers)” dealing with debt forgiveness. Initial and Subsequent Measurement IN10. Financial assets and financial liabilities are initially measured at fair value. Where an entity subsequently measures financial assets and financial liabilities at fair value, transaction costs are not included in the amount initially recognized. IN11. An entity subsequently measures financial assets using four categories: • Financial assets at fair value through surplus or deficit – assets are subsequently measured at fair value with changes in fair value recognized in surplus or deficit. 1027 IPSAS 29 PUBLIC SECTOR
FINANCIAL INSTRUMENTS: RECOGNITION AND MEASUREMENT • Held-to-maturity investments – assets are measured at amortized cost less impairment losses. Impairment losses are recognized in surplus or deficit. • Loans and receivables – assets are measured at amortized cost less impairment losses. Impairment losses are recognized in surplus or deficit. • Available-for-sale financial assets – assets are measured at fair value, with changes in fair value recognized directly in net assets/equity. Impairment losses incurred on available-for-sale instruments are recognized in surplus or deficit and not in net assets/equity. IN12. Investments in equity instruments that cannot be measured at fair value, because fair value cannot be determined reliably, are measured at cost less impairment losses. IN13. Financial liabilities are measured at amortized cost, except for financial liabilities at fair value through surplus or deficit, financial guarantees, loan commitments, and liabilities arising from transfers of financial assets. IN14. An entity may only reclassify financial instruments between the various categories under certain circumstances. Hedge Accounting IN15. IPSAS 29 prescribes principles for hedge accounting. Hedge accounting aims to reduce the volatility of an entity’s financial performance by offsetting gains and losses on certain instruments. An entity may elect to apply hedge accounting, but only if prescribed conditions are met. IPSAS 29 1028
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ipsas 29—financial instruments: recognition and measurement - IFAC

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