ipsas 29—financial instruments: recognition and measurement - IFAC

FINANCIAL INSTRUMENTS: RECOGNITION AND MEASUREMENT
transfer would result in recognizing the same rights or obligations twice. For
example, a call option retained by the transferor may prevent a transfer of
financial assets from being accounted for as a sale. In that case, the call option
is not separately recognized as a derivative asset.
AG65. To the extent that a transfer of a financial asset does not qualify for
derecognition, the transferee does not recognize the transferred asset as its
asset. The transferee derecognizes the cash or other consideration paid and
recognizes a receivable from the transferor. If the transferor has both a
right and an obligation to reacquire control of the entire transferred asset
for a fixed amount (such as under a repurchase agreement), the transferee
may account for its receivable as a loan or receivable.
Examples
AG66. The following examples illustrate the application of the derecognition
principles of this Standard.
(a) Repurchase agreements and securities lending. If a financial asset is
sold under an agreement to repurchase it at a fixed price or at the sale
price plus a lender’s return or if it is loaned under an agreement to
return it to the transferor, it is not derecognized because the transferor
retains substantially all the risks and rewards of ownership. If the
transferee obtains the right to sell or pledge the asset, the transferor
reclassifies the asset in its statement of financial position, for example,
as a loaned asset or repurchase receivable.
(b) Repurchase agreements and securities lending—assets that are
substantially the same. If a financial asset is sold under an agreement
to repurchase the same or substantially the same asset at a fixed price
or at the sale price plus a lender’s return or if a financial asset is
borrowed or loaned under an agreement to return the same or
substantially the same asset to the transferor, it is not derecognized
because the transferor retains substantially all the risks and rewards of
ownership.
(c) Repurchase agreements and securities lending—right of substitution. If
a repurchase agreement at a fixed repurchase price or a price equal to
the sale price plus a lender’s return, or a similar securities lending
transaction, provides the transferee with a right to substitute assets that
are similar and of equal fair value to the transferred asset at the
repurchase date, the asset sold or lent under a repurchase or securities
lending transaction is not derecognized because the transferor retains
substantially all the risks and rewards of ownership.
(d) Repurchase right of first refusal at fair value. If an entity sells a
financial asset and retains only a right of first refusal to repurchase the
transferred asset at fair value if the transferee subsequently sells it, the
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IPSAS 29 APPLICATION GUIDANCE
PUBLIC SECTOR