IFRScommunity.com

The transaction seems to meet the definition of a financial guarantee. When measuring the guarantee, you should take into consideration the probability of default of the associate and the value of the shares (which in this case seems to be your exposure at default). At initial recognition you recogn...

"in case of associate's default, the Parent is obliged to sell the stake on the open market and paid off the associate's liability."

Is the parent responsible to pay the whole liability or just to transfer the shares in the sub in case of default?

In the consolidated accounts you only have the building (PPE). All intra-group transactions are eliminated in the consolidation process.

Hi Kevin, Yes, the tax effect is usually deferred taxation. But please mind that gains and losses in the income statement may also give rise to deferred taxes. That is because income taxes follow local tax rules and it is often the case that tax accounting rules are different from financial accounti...

I've come across this paper:

https://aossg.org/docs/aossg%20publicat ... n-IFRS.pdf

End of the day we both agree on the entries, and that's what matters :) I still think IAS 37 applies to the performance guarantee because this is an agreement you have with a party other than your customer, and as such you ought to disclose the guarantee as part of your contingent liabilities disclo...

While I fully understand your arguments that a performance guarantee could be seen as some sort of penalty to be considered as variable consideration, I am not sure if this would lead to the best accounting treatment. Even though it is possible that a guarantee can be executed, it would make no sens...

That is an interesting view, but in my opinion performance guarantees should follow "warranty accounting" and be scoped out of IFRS 15 (based on IFRS 15 BC60).

This is the same as in many other performance guarantees. If ABC Co does not deliver or perform under the contract it has with its customer, the customer may activate the guarantee, in which case the bank will pay a certain amount to the customer (defined in the guarantee contract) and claim that am...

It is a contingent liability. Contingent liabilities shall be disclosed, unless remote (or immaterial). You may want to disclose the total amount of the bank performance guarantee facilities that are outstanding as at the reporting date.

All guarantees are contractual. But I suspect that the guarantee kishant50 is referring to is a performance guarantee, not a financial guarantee. Performance guarantees fall under the scope of IAS 37 (and some potentially under the scope of IFRS 17 for the issuer). Let's indeed wait for kishant50 to...

Hi everyone and Happy New Year.

This seems to be a performance guarantee, not a financial guarantee. It is also a contingent liability for XYZ Company and falls under the scope of IAS 37. It should be disclosed, unless remote.

Hi TaroSushi, My opinion: 1. This is a compound instrument. Interest payments cannot be avoided and shall be treated as a liability. The Qualified Financing trigger is only accelerating the timing of conversion. This conversion feature shall be treated as equity. 2. The financial liability and equit...

In the scenario you are hypothesising, arguably the issuer would only deliver a fixed number of shares if their value were lower than the amount of cash. Given that there is a possibility the settlement is made in cash -- which the issuer cannot avoid -- I think this meets the condition of financial...

No. In my opinion, that would still be a financial liability.

I think you are confusing things. The assessment depends on who has the option, and what that option is for. If the issuer has the option of avoiding paying cash or another financial asset, it is equity. If the holder has the option of converting the pref shares into a variable number of shares, it ...

No, that's not correct. If the issuer has the option of avoiding paying cash or another financial asset, then it is equity.

Don't you mean "...still be considered as a financial liability"?

If the pref shares can be converted into a variable number of shares, it is a financial liability (IAS 32.11(b)(i))

What happens to the stations at the end of the contract? You should first check whether this contract is or contains a lease.

Hello,

1. Interest payable on the lease liability is part of the lease liability's carrying amount. The lease liability is a monetary item and therefore needs to be FX revalued at each reporting date at the prevailing FX rate.

2. What is the context of this refundable deposit?

Hi Leo,

It is a financial asset because it is a non-derivative contract whereby the company will have to pay a variable number of pref shares depending on how SONIA evolves. See IAS 32 p11(d)(i)

Hi Leo,

What makes you think that? A financial asset is a financial asset as defined in IAS 32.

Please note that that the instrument does not have to be a basic lending arrangement; it's the payments that must be the same as under a basic lending arrangement. So if the consideration you get upon conversion is exactly equal to the consideration you would get if you had a plain vanilla debt inst...

Yes, I had read the draft. I did a bit of more research and I think you are right, a change of control clause, which normally requires a special meeting -- i.e. it is not a routine shareholder decision -- should be considered a shareholders decision rather than an entity decision. In any case, I fin...

Hi hubertd, In my opinion, this is an equity instrument in the issuer's accounts. That is because the company can avoid paying cash by refusing a merger, acquisition, or sale of the company. These types of events always require approval from the shareholders and, therefore, they should be treated as...

You're welcome. I don't think you can use the FVOCI option for compound instruments.

The PIK dividends seem to be a financial liability because the issuer has a contractual obligation to deliver another financial asset (more pref shares). The initial investment in pref shares seems to be equity because the issuer does not have a contractual obligation to pay cash or deliver another ...

If the "successful commissioning of the project" is under the control of the issuer, they could prevent payment of the pref shares and of any subsequent PIK dividends, could they not?

Yes, you are right in case you want to make the FVOCI election, but I just assumed you didn't want to given the only two options you suggested. Going back to your question, this seems to be a contingent settlement. If the issuer does not have the ability to avoid delivering cash or another financial...

there is no impact then