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Financial Accounting 202_S2_2023

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IFRS 7 & 9, IAS 32 Financial instruments

The book holds content for weeks 7 - 9

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Topic title: IAS 32, IFRS 7 & 9 Financial Sub-topic title: Financial assets derecognition
instruments


Competence/Attributes De-recognition of financial assets

1.      Account for financial instruments ·        de-recognition denotes removal of FA/FL previously recognised from an entity’s SOFP

  ·        FA must be de-recognised if the right to cash flows have ceased/expired or

Learning Outcomes: ·        the FA has been transferred and the transfer qualifies for de- recognition.

2.      Account for financial assets

derecognition

Figure: Source: Gripping GAAP 2019 pg 1017

Transfer of financial assets qualifying for de-recognition

·        Journal is processed to;

-        remeasure the CA of the asset de-recognised

-        recognise consideration received, de-recognise the CA and recog- nise gains/losses on
recognition in P/L

-        previous gain/loss recognised in OCI reclassify  to  P/L,  except for FA @FVOCI-equity
where reclassification is not permissible, in which case transfer to another equity account like
retained earnings

·        Illustration: refer to example 17, pg 1017, Gripping GAAP 2019/2020

Transfer of financial assets not qualifying for de-recognition

·        Arise where transfer leaves entity still holding the significant risks and rewards of owner
of the FA. Accounted for as follows;

-        assets remain in entity’s accounting records, continue to recognise income thereon on t
asset

-        recognise consideration received on transfer as FL. Measure the FL initially at the amou
the consideration received, with subsequent measurement reflecting the change in the obligat
extent.

-        The FA and the associated FL not to be offsets, likewise the income and expenses there

·        Illustration: refer to example 19, pg 1020, Gripping GAAP 2019

Content Prerequisites Transfer of financial assets involving continuing involvement

-        FA derecognition -        Conceptual ·        Situation where there’s transfer of some of the risks and rewards and some of the risks
framework rewards are retained, giving the entity some control over the asset
-        Transfer FA
qualifying for -        Double entry ·        The asset is partially de-recognised thus remained recognised to the extent of the rema
derecognition principles involvement. Accounted for thus;

-        Transfer of FA   -        assets remained in entity’s record to the extent of its exposure to changes in the value o
not qualifying for transferred asset
Remark
derecognition
-        recognise associated liability
-        Attempt
-        Transfer of FA
illustrations on -        recognise income to the extent of involvement and any expenses incurred on the assoc
involving continuing
 financial assets liability.
involvement
derecognition
Prescribed text:
 
-        Service C. L
(Latest) Gripping
GAAP: Your Guide to
International Financial
Reporting Standards,
LexisNexis

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