ipsas 29—financial instruments: recognition and measurement - IFAC

FINANCIAL INSTRUMENTS: RECOGNITION AND MEASUREMENT
disposal and the recognition of a receivable from the buyer for payment
on the trade date. Generally, interest does not start to accrue on the asset
and corresponding liability until the settlement date when title passes.
AG71. The settlement date is the date that an asset is delivered to or by an entity.
Settlement date accounting refers to (a) the recognition of an asset on the
day it is received by the entity, and (b) the derecognition of an asset and
recognition of any gain or loss on disposal on the day that it is delivered
by the entity. When settlement date accounting is applied an entity
accounts for any change in the fair value of the asset to be received during
the period between the trade date and the settlement date in the same way
as it accounts for the acquired asset. In other words, the change in value is
not recognized for assets carried at cost or amortized cost; it is recognized
in surplus or deficit for assets classified as financial assets at fair value
through surplus or deficit; and it is recognized in net assets/equity for
assets classified as available for sale.
Derecognition of a Financial Liability (paragraphs 41–44)
AG72. A financial liability (or part of it) is extinguished when the debtor either:
(a) Discharges the liability (or part of it) by paying the creditor,
normally with cash, other financial assets, goods or services; or
(b) Is legally released from primary responsibility for the liability (or
part of it) either by process of law or by the creditor. (If the debtor
has given a guarantee this condition may still be met).
AG73. If an issuer of a debt instrument repurchases that instrument, the debt is
extinguished even if the issuer is a market maker in that instrument or
intends to resell it in the near term.
AG74. Payment to a third party, including a trust (sometimes called “in-substance
defeasance”), does not, by itself, relieve the debtor of its primary
obligation to the creditor, in the absence of legal release.
AG75. If a debtor pays a third party to assume an obligation and notifies its
creditor that the third party has assumed its debt obligation, the debtor
does not derecognize the debt obligation unless the condition in paragraph
AG72(b) is met. If the debtor pays a third party to assume an obligation
and obtains a legal release from its creditor, the debtor has extinguished
the debt. However, if the debtor agrees to make payments on the debt to
the third party or direct to its original creditor, the debtor recognizes a new
debt obligation to the third party.
AG76. If a third party assumes an obligation of an entity, and the entity provides
either no or only nominal consideration to that third party in return, an
entity applies the derecognition requirements of this Standard as well as
paragraphs 84 to 87 of IPSAS 23.
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IPSAS 29 APPLICATION GUIDANCE
PUBLIC SECTOR