Search found 345 matches

by DJP
19 Jun 2023, 10:52
Forum: IFRS-related topics
Topic: Financial guarantee contract
Replies: 12
Views: 2561

Re: Financial guarantee contract

This arrangements doesn't seem to make much sense from a commercial stand point. While the facility is undrawn, there is no debt instrument. However, it seems that the guarantor will receive less premium once the facility is drawn and the debt crystalises. What sense does this make? Are you sure the...
by DJP
12 Jun 2023, 17:16
Forum: IFRS-related topics
Topic: IAS 1.69
Replies: 17
Views: 3294

Re: IAS 1.69

You are looking at paragraph 73 as if this is an exception created only for rollovers, but that is not the case. Paragraph 73 is simply illustrating a case of when an obligation may be due within 12 months, but you have the right -- at the end of the reporting date -- to defer settlement for at leas...
by DJP
12 Jun 2023, 16:29
Forum: IFRS-related topics
Topic: IAS 1.69
Replies: 17
Views: 3294

Re: IAS 1.69

Paragraph 73 is giving you an example of when a right to defer settlement for at least twelve months exists at the reporting date. Paragraph 73 is not an exception to paragraph 69 (c); it is rather an example of how paragraph 69 (d) should be interpreted.
by DJP
12 Jun 2023, 14:28
Forum: IFRS-related topics
Topic: IAS 1.69
Replies: 17
Views: 3294

Re: IAS 1.69

Hello. I don't see any inconsistency between 1.69(c) and (d). In your example, the liability seems to be current because it is due within 12 months from the reporting date. You need to take paragraph 72A into consideration to assess whether the conditions that will allow you to defer settlement of t...
by DJP
31 May 2023, 14:33
Forum: IFRS-related topics
Topic: First Business Model or First SPPI test?
Replies: 16
Views: 5720

Re: First Business Model or First SPPI test?

As Marek pointed out, IFRS 9 does not prescribe the order in which you need to apply the business model and SPPI assessments. You basically should do it in the order you find most efficient.
by DJP
18 May 2023, 11:41
Forum: IFRS-related topics
Topic: Hedge Accounting
Replies: 30
Views: 14240

Re: Hedge Accounting

Thank you! Always a pleasure to help
by DJP
15 May 2023, 15:47
Forum: IFRS-related topics
Topic: ias32
Replies: 13
Views: 2280

Re: ias32

Definitely not a financial liability (for the reason given by Marek), but in my opinion this should be a IAS 37 provision. Which case are you referring to, JRSB?
by DJP
15 May 2023, 12:57
Forum: IFRS-related topics
Topic: Hedge Accounting
Replies: 30
Views: 14240

Re: Hedge Accounting

Ok. So let's imagine that you are hedging the firm commitment to purchase inventory with a forward, and let's assume that the forward as a positive value for you because the value of the inventory has increased in the meantime. If you apply hedge accounting, you will measure the derivative and firm ...
by DJP
12 May 2023, 11:38
Forum: IFRS-related topics
Topic: Hedge Accounting
Replies: 30
Views: 14240

Re: Hedge Accounting

1 - yes, only when you recognise revenue (at that time you will then derecognise the firm commitment liability against revenue) 2 - for the fair value hedge of firm commitments, you will adjust the initial carrying amounts of the asset/liability with the cumulative fair value changes that you've bee...
by DJP
10 May 2023, 11:12
Forum: IFRS-related topics
Topic: Hedge Accounting
Replies: 30
Views: 14240

Re: Hedge Accounting

It is a cash flow hedge because the cash flow you end up receiving has changed due to changes in the FX rate. But you can also see it as a fair value hedge because the fair value of the commitment changes due to changes in the FX rate. FX risk has this dual character. If you treat this hedge as a ca...
by DJP
09 May 2023, 11:49
Forum: IFRS-related topics
Topic: Hedge Accounting
Replies: 30
Views: 14240

Re: Hedge Accounting

Hi DanSal, First of all, because the standards says so. But it does so because of the dual character of a firm commitment exposure in a foreign currency. If you have a firm commitment in your functional currency, the only thing that is affected during the life of the exposure is its fair value (the ...
by DJP
04 May 2023, 10:23
Forum: IFRS-related topics
Topic: Hedge Accounting
Replies: 30
Views: 14240

Re: Hedge Accounting

I assume that you mean commodities prices in your own functional currency. In that case: If you want to hedge a highly probable forecast purchase of oil, that is a cash flow hedge (you want to fix the price and not have variability in your cash flow). If you want to hedge a firm commitment of an oil...
by DJP
03 May 2023, 09:53
Forum: IFRS-related topics
Topic: Hedge Accounting
Replies: 30
Views: 14240

Re: Hedge Accounting

Yes, that is correct. Note however that this is only applicable to FX risk.
by DJP
02 May 2023, 10:46
Forum: IFRS-related topics
Topic: Hedge Accounting
Replies: 30
Views: 14240

Re: Hedge Accounting

If it is a highly probable forecast transaction, it is a cash flow hedge. But if it is a firm commitment to receive USD, it can be accounted for as a cash flow hedge or a fair value hedge.
by DJP
25 Apr 2023, 17:31
Forum: IFRS-related topics
Topic: Financial liability in foreign currency to cost amortized (with transaction cost in functional currency)
Replies: 6
Views: 1513

Re: Financial liability in foreign currency to cost amortized (with transaction cost in functional currency)

Yup. You can do it on materiality grounds. Just make sure you document the decision for future reference if needed.
by DJP
25 Apr 2023, 17:19
Forum: IFRS-related topics
Topic: Financial liability in foreign currency to cost amortized (with transaction cost in functional currency)
Replies: 6
Views: 1513

Re: Financial liability in foreign currency to cost amortized (with transaction cost in functional currency)

I don't really see a problem. Think of this from a net cash flow perspective. In the beginning you had a net cash inflow of FCU 1,900 which was equivalent to CU 190,000. And in the end you will have a cash outflow of FCU 2,000 which will be equivalent in CU to whatever rate is prevailing at that tim...
by DJP
25 Apr 2023, 09:38
Forum: IFRS-related topics
Topic: Financial liability in foreign currency to cost amortized (with transaction cost in functional currency)
Replies: 6
Views: 1513

Re: Financial liability in foreign currency to cost amortized (with transaction cost in functional currency)

Hello, Any costs that are considered to be transaction costs are so because they are an integral part of the financial instrument's effective interest. As such -- and in my opinion -- any transaction costs in a currency other than the financial instrument's currency should be converted into the fina...
by DJP
24 Apr 2023, 11:35
Forum: IFRS-related topics
Topic: Hedge Accounting
Replies: 30
Views: 14240

Re: Hedge Accounting

Hi Daniel, This is quite a vast topic that is not easy to explain in a few words. Hedge accounting is designed to address an accounting mismatch created by IFRS 9 rules. When companies hedge existing or futures exposures, they often use derivatives. Derivatives are always accounted for at FVTPL, but...
by DJP
03 Apr 2023, 11:02
Forum: IFRS-related topics
Topic: Redeemable preferred shares and equity accounting
Replies: 8
Views: 1547

Re: Redeemable preferred shares and equity accounting

By the description it looks like this is a debt instrument. You may have voting rights, but you don't seem to be exposed to any variable returns. Why FVTPL though?
by DJP
16 Mar 2023, 14:52
Forum: IFRS-related topics
Topic: Selling a minorities of shareholding
Replies: 8
Views: 1595

Re: Selling a minorities of shareholding

IAS 32 tells you what an equity instrument is, not how to deal with changes in a group structure. In a nutshell, if you reduce your stake in a sub without losing control: - you shall not recalculate goodwill - a profit or loss does not arise in the consolidated financial statements, and - the increa...
by DJP
16 Mar 2023, 14:19
Forum: IFRS-related topics
Topic: Selling a minorities of shareholding
Replies: 8
Views: 1595

Re: Selling a minorities of shareholding

IFRS 10 (paragraph 23)
by DJP
16 Mar 2023, 11:18
Forum: IFRS-related topics
Topic: Goodwill impairment
Replies: 5
Views: 1079

Re: Goodwill impairment

:) Hopefully the sub will really continue operating, otherwise that GW would be immediately impaired, hehehhe I think you are a bit confused about where the money goes to. Say that Company A buys Company B. Let's assume that Company B is a private company and held by one single shareholder (Mr Rich)...
by DJP
16 Mar 2023, 11:02
Forum: IFRS-related topics
Topic: Goodwill impairment
Replies: 5
Views: 1079

Re: Goodwill impairment

The cash will go to the shareholder(s) of the acquired business, not to the business itself. Normally, there will be no equity adjustments in the accounts of the acquiree (just a change of ownership).
by DJP
16 Mar 2023, 10:57
Forum: IFRS-related topics
Topic: Employee Benefits and IFRS 9
Replies: 4
Views: 1717

Re: Employee Benefits and IFRS 9

Very good question. IFRS 7 scopes out employer's rights and obligations arising from employee benefit plans (IFRS 7 o 3 (b)). It does not say anything about other employee benefits, so one could conclude that some of the benefits you are mentioning are financial liabilities under IAS 32 and would fa...
by DJP
16 Mar 2023, 10:15
Forum: IFRS-related topics
Topic: Goodwill impairment
Replies: 5
Views: 1079

Re: Goodwill impairment

Hello, I think first you need to understand what Goodwill is. When a company acquires a business and is deemed to have control over that business, it will need to consolidate the financial statements of both companies. At the time of acquisition, you need to identify and recognise all the assets and...
by DJP
15 Mar 2023, 11:09
Forum: IFRS-related topics
Topic: IFRS 9 - Loan facility at below market interest rate (intercompany loan)
Replies: 6
Views: 1262

Re: IFRS 9 - Loan facility at below market interest rate (intercompany loan)

Indeed it does, but this is a transaction between two entities under common control. I wonder how "commited" this facility is, and so I think you can make a case not to recognise this facility. Otherwise you need to apply paragraph 4.2.1 (d).
by DJP
14 Mar 2023, 17:21
Forum: IFRS-related topics
Topic: IFRS 9 - Loan facility at below market interest rate (intercompany loan)
Replies: 6
Views: 1262

Re: IFRS 9 - Loan facility at below market interest rate (intercompany loan)

The credit facility is a loan commitment and it is explicitly excluded from IFRS 9 (see paragraph 2.1 (g)). You don't account for it, although IFRS 9's impairment requirements do apply.

So yes, you should account for the drawdowns as separate financial instruments.
by DJP
13 Mar 2023, 16:57
Forum: IFRS-related topics
Topic: Interest rate risk affecting fair value
Replies: 8
Views: 1964

Re: Interest rate risk affecting fair value

Yes Marek, you are right. Changes in interest rate will have an impact on fixed instruments at amortised cost for fair value disclosure purposes.

I simply assumed that the question was asked in regard to sensitivity analysis disclosures.
by DJP
13 Mar 2023, 10:12
Forum: IFRS-related topics
Topic: Interest rate risk affecting fair value
Replies: 8
Views: 1964

Re: Interest rate risk affecting fair value

"and thereby recalculate the difference between the amortised cost in the books at a given reporting date, and the revised amortised cost at that date. Is that right ?" No, if you only have fixed-rate instruments accounted for at amortised cost, your P&L/Equity does not get affected by...
by DJP
13 Mar 2023, 09:35
Forum: IFRS-related topics
Topic: Interest rate risk affecting fair value
Replies: 8
Views: 1964

Re: Interest rate risk affecting fair value

Answering your questions: "would the fair value of the loan change due to changes in market interest rates, such that the profit/loss for the year or equity as at year end would be affected?" -- no, if the loan is at amortised cost and interest rate is fixed, there will be no impact on P&a...