Search found 114 matches

by DJP
03 Nov 2020, 17:09
Forum: IFRS-related topics
Topic: IFRS 9 Incremental costs of obtaining a derivate
Replies: 23
Views: 1159

Re: IFRS 9 Incremental costs of obtaining a derivate

When it comes to P&L geography, IFRS does not provide much details. Where will you take your derivative's fair value changes once you recycle your cash flow hedge reserve? I am presuming you will take it to operating results since you are applying hedge accounting, and if so I would do the same ...
by DJP
03 Nov 2020, 10:32
Forum: IFRS-related topics
Topic: IFRS 9 Incremental costs of obtaining a derivate
Replies: 23
Views: 1159

Re: IFRS 9 Incremental costs of obtaining a derivate

Are you applying cash flow hedge accounting on this derivative? Assuming that you are, and that the designated hedged risk is the change in the electricity prices, even if you consider the agency fee as part of your derivative's fair value (and I'm not sure if you can, it really depends on the contr...
by DJP
02 Nov 2020, 15:39
Forum: IFRS-related topics
Topic: IFRS 9 Incremental costs of obtaining a derivate
Replies: 23
Views: 1159

Re: IFRS 9 Incremental costs of obtaining a derivate

If the contact is indeed a derivative in the scope of IFRS 9, you need to account for it as such, i.e. at FVTPL. If there are any costs associated with this contract (can you give examples?) I'm afraid you will have to expense them.

Cheers
by DJP
27 Oct 2020, 16:52
Forum: IFRS-related topics
Topic: "Loan commitments that can be settled net in cash"
Replies: 3
Views: 857

Re: "Loan commitments that can be settled net in cash"

A loan commitment is a commitment to make a loan in the future at a specified rate. This meets the definition of a derivative. Therefore, the IASB decided to simplify the accounting for loan commitments by excluding them from IFRS 9, unless you designate them at FVTPL, or if they can be net settled ...
by DJP
22 Oct 2020, 00:19
Forum: IFRS-related topics
Topic: Accounting for FX spot deals
Replies: 12
Views: 535

Re: Accounting for FX spot deals

Then we would be left with derivative accounting :)
by DJP
21 Oct 2020, 20:59
Forum: IFRS-related topics
Topic: Accounting for FX spot deals
Replies: 12
Views: 535

Re: Accounting for FX spot deals

IFRS 9's example is about the purchase of a financial asset. Deloitte's example is about the sale of a financial asset (foreign currency cash). In one case the financial asset (we don't know which) is recognised against a payable, and in the other the financial asset (cash) is derecognised against a...
by DJP
21 Oct 2020, 20:04
Forum: IFRS-related topics
Topic: Accounting for FX spot deals
Replies: 12
Views: 535

Re: Accounting for FX spot deals

Indeed they are, but they don't specify what financial asset they are purchasing. What if it is cash, which is the case in a FX spot transaction? Cash is also a financial asset, so the same logic in that example applies (and I guess that's where Deloitte is basing their example on). But in a FX spot...
by DJP
21 Oct 2020, 19:21
Forum: IFRS-related topics
Topic: Accounting for FX spot deals
Replies: 12
Views: 535

Re: Accounting for FX spot deals

Yup, their example is the sale of USD in a GBP functional currency entity. On trade date they recognise a receivable for the foreign currency they are selling (in GBP) and immediately derecognise the foreign currency (Cash USD). But a FX spot transaction consists of selling a currency and buying ano...
by DJP
21 Oct 2020, 14:00
Forum: IFRS-related topics
Topic: Accounting for FX spot deals
Replies: 12
Views: 535

Re: Accounting for FX spot deals

The recognition of the payable is in line with the example provided by Deloitte (although in their example they are selling a foreign currency instead of buying it, so they record a receivable). But also please note that this should be the accounting treatment for any other financial asset that you ...
by DJP
19 Oct 2020, 13:35
Forum: IFRS-related topics
Topic: Accounting for FX spot deals
Replies: 12
Views: 535

Accounting for FX spot deals

Hello everyone. I was wondering if you could shed some light on how your companies are dealing with the recognition and derecognition of FX spot deals. As you know, there is an accounting policy choice for when to recognise regular-way transactions: trade date or settlement date. The first question ...
by DJP
14 Oct 2020, 15:10
Forum: IFRS-related topics
Topic: How to interpret IFRS 9 B4.3.4 - embedded derivatives
Replies: 7
Views: 629

Re: How to interpret IFRS 9 B4.3.4 - embedded derivatives

Please note that one of the Big 4 seems to suggest in its manual of accounting that this is an accounting policy choice.
by DJP
12 Oct 2020, 18:05
Forum: IFRS-related topics
Topic: CF hedges of intragroup forecast capital transactions
Replies: 9
Views: 548

Re: CF hedges of intragroup forecast capital transactions

I see. I think you should be able to designate the purchase of the PPE in a foreign currency in the consolidated accounts as a cash flow hedge. This would just imply a bit of more operational work in the consolidation process because during the life of the derivative you would have to reclassify the...
by DJP
10 Oct 2020, 12:42
Forum: IFRS-related topics
Topic: CF hedges of intragroup forecast capital transactions
Replies: 9
Views: 548

Re: CF hedges of intragroup forecast capital transactions

Do I assume correctly that the non-financial asset purchase at the sub is denominated in the subs' functional currency?
by DJP
09 Oct 2020, 17:47
Forum: IFRS-related topics
Topic: CF hedges of intragroup forecast capital transactions
Replies: 9
Views: 548

Re: CF hedges of intragroup forecast capital transactions

I understand your solution for example 2 (although I think you mean the portion of net assets equal to the amount of dividends to be received; not distributed, right?) In any case, yes, the mechanics would work and I believe this was common practice under IAS 39. However, I think it will be difficul...
by DJP
09 Oct 2020, 09:43
Forum: IFRS-related topics
Topic: Deposits
Replies: 5
Views: 250

Re: Deposits

Hello, It is definitely a non-current liability because (presumably) you don't have to pay it within your operating cycle (assuming 12 months). It is a financial liability, but it is not a borrowing. I would include it on the balance sheet in "other liabilities non-current liabilities". If...
by DJP
07 Oct 2020, 11:44
Forum: IFRS-related topics
Topic: CF hedges of intragroup forecast capital transactions
Replies: 9
Views: 548

Re: CF hedges of intragroup forecast capital transactions

Hello, In my view, neither transaction can be designated as a hedged item under a net investment hedge. That's because in both cases the hedged items are forecast transactions, whereas the hedged item in a net investment hedge should be the net assets of a foreign operation that are included in the ...
by DJP
02 Oct 2020, 11:47
Forum: IFRS-related topics
Topic: How to interpret IFRS 9 B4.3.4 - embedded derivatives
Replies: 7
Views: 629

Re: How to interpret IFRS 9 B4.3.4 - embedded derivatives

I share the same opinion. Only bifurcate EDs that are not closely related. But I appreciate that a literal interpretation of B4.3.4 may lead to a different conclusion. Thanks!
by DJP
01 Oct 2020, 17:49
Forum: IFRS-related topics
Topic: How to interpret IFRS 9 B4.3.4 - embedded derivatives
Replies: 7
Views: 629

Re: How to interpret IFRS 9 B4.3.4 - embedded derivatives

That is a good point, but paragraph B4.3.8 (d) specifically addresses embedded foreign currency derivatives, whereas B4.3.8 (b) seems to address caps and floors only on interest rates and asset prices. It seems that the foreign currency risk in non-financial instrument contracts has a special treatm...
by DJP
01 Oct 2020, 16:58
Forum: IFRS-related topics
Topic: How to interpret IFRS 9 B4.3.4 - embedded derivatives
Replies: 7
Views: 629

How to interpret IFRS 9 B4.3.4 - embedded derivatives

Hello, IFRS 9 B4.3.4 tell us that multiple embedded derivatives in a single hybrid contract are treated as a single compound embedded derivative, unless the risks they relate to are different, in which case different risk exposures are accounted for separately. Question is -- is this only applicable...
by DJP
01 Oct 2020, 16:13
Forum: IFRS-related topics
Topic: Derivative transaction double entries
Replies: 12
Views: 661

Re: Derivative transaction double entries

How would a Forward have a Nil value even if it was entered into at FV ? You would have a derivative asset and an obligation to pay, these would offset but are surely separate? A Swap I agree, so what would you book day 1? Dr Asset Cr payable, and Dr receivable Cr Liability? The fair value of a for...
by DJP
01 Oct 2020, 13:13
Forum: IFRS-related topics
Topic: IFRS 9 on Cash and Cash equivalents
Replies: 7
Views: 415

Re: IFRS 9 on Cash and Cash equivalents

Theoretically you do have to calculate ECL on cash and cash equivalents, but in practice you may choose not to because the impact should be immaterial (a characteristic of a C&CE is that it should be subject to insignificant changes in value, and that includes credit risk). However, if a substan...
by DJP
01 Oct 2020, 13:07
Forum: IFRS-related topics
Topic: Derivative transaction double entries
Replies: 12
Views: 661

Re: Derivative transaction double entries

You do not have to recognize the asset and liabilities with respect to the notional amount of the derivative. What you carry on your balance sheet is the fair value of the derivative (which is net of receive and pay legs). In absence of any hedge accounting, the fair value changes go to P&L and...
by DJP
01 Oct 2020, 13:00
Forum: IFRS-related topics
Topic: IFRS 9 Embedded derivatives
Replies: 6
Views: 441

Re: IFRS 9 Embedded derivatives

It is an embedded derivative, but it doesn't have to be bifurcated if the functional currency of the supplier is the USD or if these transactions are commonly denominated in USD in SA (assuming that there are not other features in the contract). Otherwise, it has to be bifurcated and accounted for s...