IFRS Jargon

Last update 07/12/2019 The three stages Expected Credit Losses are the way of forward looking loss provision accounting for certain financial assets under IFRS 9 Financial Instruments. After initial recognition, the three stages of impairment loss calculation and interest revenue recognition are applied each reporting date as follows: Stage 1: Credit risk has not increased … Read more

Last update 06/01/2020 The five contract identification criteria – These criteria are part of the first step in the application of the core principle in IFRS 15.  IFRS 15 9 Revenue from Contracts with Customers is applied to contracts with customers that meet all of the following five contract identification criteria (contract existence): The contract … Read more

Last update 27/12/2019 The acquisition method – Assuming that a transaction is concluded to be a business combination, IFRS 3 requires that a business combination be accounted for by applying what is referred to as the acquisition method. The IFRS/US GAAP replaced the term “purchase method,” which previously was used to describe the method of … Read more

Last update 13/12/2019 Term deposits are financial instruments. These are cash deposits remunerated at fixed maturity date and rate, determined in advance. 1. Characteristics: Yield: payment of interests; Duration: short-term (up to 4 years), medium-term (4-8 years) or long-term (more than 8 years); Interests: interests depend on the terms and conditions of the deposit; e.g. … Read more

Last update 11/12/2019 Synthetic products are financial instruments. Synthetic products – essentially covered options and certificates – are characterised by their identical or similar profit and loss structures when compared with specific traditional financial instruments (shares or bonds). They result from the combination of two or several financial instruments in the same product. Basket certificates, … Read more

Last update 29/12/2019 Swaps are contractual agreements between two parties who agree to exchange one set of cash flows for another. The two parties that agree to exchange the cash flows are called counterparties of the swaps. Swaption – A swaption is an option granting its owner the right but not the obligation to enter … Read more

Last update 10/12/2019 Substantive substitution rights – Even if an asset in a lease arrangement is specified, a customer does not have the right to use an identified asset if, at inception of the contract, a supplier has the substantive right to substitute the asset throughout the period of use (i.e., the total period of … Read more

Last update 04/01/2020 Substance of rights and obligations is a ‘definition’ from the Conceptual Framework. The terms of a contract create rights and obligations for an entity that is a party to that contract. To represent those rights and obligations faithfully, financial statements report their substance. In some cases, the substance of the rights and obligations … Read more

Last update 11/12/2019 Structured products or Euro Medium Term Note – Structured products are combinations of two or more financial instruments, forming together a new investment product. At least one of them must be a derivative product. Structured products with capital protection are the most frequently traded. Such products can be traded either on the stock-exchange … Read more

Last update 05/01/2020 A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements. Whether an investee … Read more