FINANCIAL INSTRUMENTS Module 4 Derecognition & Modification of Financial Assets R 496 In this module, you will learn to determine whether a financial asset qualifies for derecognition or not. New and emerging trends provide innovative solutions for adapting irrevocable trusts to changing circumstances. The IFRS commentary is based on the financial instruments guidance in IAS 32 and IFRS 9, ‘Financial instruments’. Financial Instruments – Recognition and Measurement. The IC previously concluded that this is a principle that underlies amortised cost measurement. a proposal to replace its existing financial instruments standard, IAS 39, in three phases. Each word should be on a separate line. issued since 2009. IFRS 9 Financial Instruments is one of the most challenging standards because it’s sooo complex and sometimes complicated. And as with debt instruments between unrelated parties, modification of debt instruments between related parties may have a number of tax consequences. In case of modification in financial instrument, PV is to be calculated based on the revised ERI, revised service period and revised payment terms and the difference should be transferred to P&L. As such, the risk of unintended consequences for treating a modified financial liability in the same way is low. The constant pressure to deliver value for money, the role of the private sector in service delivery and intense public scrutiny all represent challenges and opportunities for public sector organisations in central government, local government and... 200 UK and international real estate specialists advising clients on domestic and international assurance, tax and transactional matters. This is commonly referred to as the ‘10% test’ and requires a comparison of the cash flows before and after the modification which are discounted to present value using the original effective interest rate, i.e. Scope 9 3. Amortised cost 13 3.1.1. “Modification” is broadly defined in the regulations. This has given rise to questions about how to account for the modification of financial liabilities that have not been derecognised – specifically whether the difference between the original and modified amortised cost should be recognised in profit or loss immediately instead of being amortised over the remaining term. Volume B - Financial Instruments - IFRS 9 and related standards 2019; B8 Recognition and derecognition; 4 Derecognition of a financial liability; 4.2 Accounting for a modification or exchange of financial liability that does not result in derecognition The Staff believe that the key to addressing these concerns is an acknowledgement of the fact that a modified financial liability that is not derecognised is regarded as a continuation of the original liability. The different versions of IFRS 9 IFRS 9 has been completed in stages, with the IASB’s phased approach reflected in a number of versions of the standard being . instrument of . In other words, on the date of modification, no loss is recognised for costs or fees incurred, whereas a gain/loss is recognised for modifications to the future contractual cash flows. hyphenated at the specified hyphenation points. MFRS 9 will be effective for financial period beginning on or after 1 January 2018 with early application permitted. They believe that this paragraph applies to a revision of the estimated cash flows according to the, The Staff believe that the key to addressing these concerns is an acknowledgement of the fact that a modified financial liability that is not derecognised is regarded as a, IFRS Interpretations Committee meeting — 13 June 2017, IFRS Foundation publishes IFRS Taxonomy update, European Union formally adopts IFRS 4 amendments regarding the temporary exemption from applying IFRS 9, Educational material on applying IFRSs to climate-related matters, IASB officially adds PIR of IFRS 9 to its work plan, EFRAG endorsement status report 16 December 2020, A Closer Look — Financial instrument disclosures when applying Interest Rate Benchmark Reform – Phase 1 amendments to IFRS 9 and IAS 39 and Phase 2 amendments to IFRS 9, IAS 39, IFRS 4 and IFRS 16, EFRAG endorsement status report 6 November 2020, EFRAG endorsement status report 23 October 2020, IAS 39 — Financial Instruments: Recognition and Measurement, IFRIC 10 — Interim Financial Reporting and Impairment, Different effective dates of IFRS 9 and the new insurance contracts standard, Financial instruments — Effective date of IFRS 9, Financial instruments — Limited reconsideration of IFRS 9. 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