ipsas 29—financial instruments: recognition and measurement - IFAC

FINANCIAL INSTRUMENTS: RECOGNITION AND MEASUREMENT
extent of the transferor’s continuing involvement (see paragraph
AG64). The entity transfers control of the asset if the put option is
not sufficiently valuable to prevent the transferee from selling the
asset, in which case the asset is derecognized.
(j) Assets subject to a fair value put or call option or a forward repurchase
agreement. A transfer of a financial asset that is subject only to a put or
call option or a forward repurchase agreement that has an exercise or
repurchase price equal to the fair value of the financial asset at the time
of repurchase results in derecognition because of the transfer of
substantially all the risks and rewards of ownership.
(k) Cash settled call or put options. An entity evaluates the transfer of a
financial asset that is subject to a put or call option or a forward
repurchase agreement that will be settled net in cash to determine
whether it has retained or transferred substantially all the risks and
rewards of ownership. If the entity has not retained substantially all the
risks and rewards of ownership of the transferred asset, it determines
whether it has retained control of the transferred asset. That the put or
the call or the forward repurchase agreement is settled net in cash does
not automatically mean that the entity has transferred control (see
paragraphs AG59 and (g), (h) and (i) above).
(l) Removal of accounts provision. A removal of accounts provision is
an unconditional repurchase (call) option that gives an entity the
right to reclaim assets transferred subject to some restrictions.
Provided that such an option results in the entity neither retaining
nor transferring substantially all the risks and rewards of
ownership, it precludes derecognition only to the extent of the
amount subject to repurchase (assuming that the transferee cannot
sell the assets). For example, if the carrying amount and proceeds
from the transfer of loan assets are CU100,000 and any individual
loan could be called back but the aggregate amount of loans that
could be repurchased could not exceed CU10,000, CU90,000 of the
loans would qualify for derecognition.
(m) Clean-up calls. An entity, which may be a transferor, that services
transferred assets may hold a clean-up call to purchase remaining
transferred assets when the amount of outstanding assets falls to a
specified level at which the cost of servicing those assets becomes
burdensome in relation to the benefits of servicing. Provided that such
a clean-up call results in the entity neither retaining nor transferring
substantially all the risks and rewards of ownership and the transferee
cannot sell the assets, it precludes derecognition only to the extent of
the amount of the assets that is subject to the call option.
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IPSAS 29 APPLICATION GUIDANCE
PUBLIC SECTOR