Hedge accounting requirements

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Last update 27/11/2019 Hedge accounting requirements – IFRS 9 now allows, for fair value hedges, the designation of layer components from a defined nominal amount or a defined, but open, population. IFRS 9 still includes some restrictions, in particular that a layer component that includes a prepayment option does not qualify as a hedged item … Read more

Substantive substitution rights

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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

Hedge accounting of hedges for commodity risks

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Last update 16/09/2019 Under the old rules of IAS 39, hedge accounting could be difficult to achieve in relation to commodity exposures. This was largely due to the fact that IAS 39 did not permit hedging of specific risk components of non-financial items (with the exception of FX risk). Hedge accounting of hedges for commodity … Read more

Substance of rights and obligations

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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

Guidance in identifying the acquirer

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Last update 04/12/2019 Guidance in identifying the acquirer – The guidance in IFRS 10 Consolidated Financial Statements shall be used to identify the acquirer—the entity that obtains control of the acquiree. If a business combination has occurred but applying the guidance in IFRS 10 does not clearly indicate which of the combining entities is the … Read more

Structured products or Euro Medium Term Note (EMTN)

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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

Groups of items Hedging

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Last update 27/11/2019 Groups of items hedging, designation of layer components these are relevant for a practical risk management process to base hedge accounting on. Hedge accounting under IAS 39 was primarily designed from a single instrument viewpoint, and therefore less effective to apply. A hedging relationship would typically include a single hedging instrument (e.g., … Read more

Structured entity

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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

Group cash pooling and company accounts

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Last update 22/12/2019 Group cash pooling and company accounts – Cash pooling arrangements arise where one group entity (which may be the ultimate group parent, or a fellow subsidiary) acts as the treasury function for the rest of the group. Under these arrangements, one entity within a group holds and maintains all cash balances with … Read more

Stochastic Modeling in Insurance

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Last update 18/12/2019 Stochastic Modeling in Insurance – Some general introduction in addition to this narrative is provided in wikipedia, Stochastic Modeling (insurance). Recent cataclysmic events like the tsunami, torrential downpour, floods, cyclones, earthquakes, etc. underscore the fact that everyone would like to be assured that there is some (non-supernatural) agency to bank upon in … Read more