IFRS Jargon

Last update 17/08/2019 A financial asset or financial liability that: is acquired or incurred principally for the purpose of selling or repurchasing it in the near term; on initial recognition is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking; or is … Read more

Last update 11/12/2019 Hedge accounting – What is this all about? If investors purchase a security that comprises a high level of risk, they may accompany the purchase with an opposing item (usually a derivative, such as an option or future contract) referred to as a hedge. This hedge experiences gains in value when the … Read more

Last update 28/12/2019 Grouping similar hedging transactions – It sometimes will be impractical (perhaps impossible) and not cost-effective for an entity to identify each individual transaction that is being hedged. An example is a group of sales or purchases over a period of time to or from one or more parties. IFRS 9 permits an … Read more

Last update 05/01/2020 Group treasury function – the goal of most treasury functions is to optimize the organization’s liquidity, make sound financial investments, mitigate financial risks, and provide useful cash/interest/investment reporting. A treasury function is (depending on the size of a group) a centralised support and service function that acts as the custodian of a … Read more

Last update 17/12/2019 General model of measurement of insurance contracts – Insurance contracts may be highly complex bundles of interdependent rights and obligations and combine features of a financial instrument and features of a service contract. As a result, insurance contracts can provide their issuers with different sources of income – e.g. underwriting profit, fees from … Read more

Last update 09/12/2019 The general approach expected credit losses is what it is the most accepted or normal or preferred way of loss provisioning financial assets to a level at which it is becoming unlikely that they are overstated. Under the “expected credit loss” model, an entity calculates the allowance for credit losses by considering … Read more

Last update 17/08/2019 Qualitative characteristics that financial information must possess to make it useful to the primary users of general purpose financial reports. They are relevance and faithful representation. Relevance Relevant financial information is capable of making a difference in the decisions made by users. Information may be capable of making a difference in a … Read more

Last update 06/12/2019 Full derecognition with recognition of new assets or liabilities Full derecognition (transferred off-balance sheet) – with recognition of any new assets or liabilities Assets 95% of transfers resulting in full recognition are simple, the entity that has recorded a financial asset receives cash and removes the asset from its financial position. However, … Read more

Last update 18/12/2019 Fulfilment cash flows comprise: a current estimate of unbiased and probability-weighted future cash flows expected to arise during the life of the contract; a discount adjustment to reflect the time value of money and financial risks, such as liquidity and currency risks (layers of discounting); an explicit risk adjustment for non-financial risks. … Read more

Last update 28/12/2019 Free cash flow represents the cash a company generates after cash outflows to support operations and maintain its capital assets. Unlike earnings or net income, free cash flow is a measure of profitability that excludes the non-cash expenses of the income statement and includes spending on equipment and assets as well as … Read more