In-substance fixed lease payments

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Last update 09/12/2019 Lease payments include any in-substance fixed lease payments. In-substance fixed lease payments are payments that may, in form, contain variability but that, in substance, are unavoidable. In-substance fixed lease payments exist, for example, if: payments are structured as variable lease payments, but there is no genuine variability in those payments. Those payments … Read more

Cross-currency swap

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Last update 22/12/2019 Cross-currency swap – In a currency swap operation, also known as a cross-currency swap, the parties involved agree under contract to exchange the following: the principal amount of a loan in one currency and the interest applicable on it during a specified period of time for a corresponding amount and applicable interest … Read more

Impracticable

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Last update 17/08/2019 It is impracticable to apply a requirement if the entity cannot apply it after making every reasonable effort to do so. ‘Impracticable’ is a high hurdle. What constitutes undue cost or effort is a matter of judgement. In short: IFRS definition IAS 8: Applying a requirement is impracticable when the entity cannot … Read more

Credit risk on the hedging instrument

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Last update 27/11/2019 Credit risk on the hedging instrument and credit risk on the hedged item and the impact of changes in these credit risks should not be of a magnitude such that it dominates the value changes, even if there is an economic relationship between the hedged item and hedging instrument. Credit risk can … Read more

Impairment of assets

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Last update 17/08/2019 Impairment of assets requires that the recoverable amount of an asset should be estimated whenever there is indication that the asset may be impaired. Impairment of assets requires an impairment loss to be recognised (an asset is impaired) whenever the carrying amount of an asset exceeds its recoverable amount. An impairment loss … Read more

Credit risk on the hedged item

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Last update 27/11/2019 IFRS 9 requires that, to achieve hedge accounting, the impact of changes in credit risk (this is credit risk on the hedging instrument and credit risk on the hedged item) should not be of a magnitude such that it dominates the value changes, even if there is an economic relationship between the hedged … Read more

Impairment – Example

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Last update 05/02/2019 Accounting example Impairment of property, plant and equipment, intangible assets, and goodwill The group assesses assets or groups of assets, called cash-generating units (CGUs), for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or CGU may not be recoverable; for example, changes in the group’s … Read more

Credit risk exposures

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Last update 27/11/2019 Many financial institutions hedge the credit risk (i.e. insure credit risk exposures) arising from loans or loan commitments using credit default swaps (CDS). This would often result in an accounting mismatch, as loans and loan commitments are typically not accounted for at fair value through profit or loss. The simplest accounting would … Read more

IFRS 3 Measurement period

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Last update 16/12/2019 IFRS 3 Definition: Measurement period – the period after the acquisition date during which the acquirer may adjust the provisional amounts recognized for a business combination, providing the acquirer with a reasonable time to obtain the information necessary to apply the requirements of IFRS 3. The measurement period shall not exceed one … Read more

Creating a new contract or not?

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Last update 05/12/2019 Creating a new contract or not – What is a modification of a contract and what is a new contract? The way chosen in IFRS 15 Revenue from Contracts with Customers is that the general rule is that a modification is a continuation of an existing contract with some changes. To account … Read more