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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 27/11/2019 Hedge Economic relationship is the basis why hedging has been invented in the first place – your loss is my profit to put it simple, just like buying a piece of art and pay it by cash, win and loose. Under IFRS 9, a hedging relationship qualifies for hedge accounting if it … 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 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
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 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
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 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
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 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