Part Amendments to AASB 1023 - AASB 2009-11 - Amendments to Australian Accounting Standards arising from AASB 9 - December 2009 - Amendments to AASB 1023 | Zoe
AASB 2009-11 - Amendments to Australian Accounting Standards arising from AASB 9 - December 2009
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53 In paragraphs 15.2, 15.5, 15.5.1 and 15.5.2, the references to ‘AASB 139’ are replaced with ‘AASB 9’.
54 Paragraphs 2.3.1, 15.2.1, 15.2.2, 16.1 and 16.1.1 are amended, and paragraphs 16.1.2, 16.1.3 and 18.4 are added as follows:
2.3.1 AASB 9 Financial Instruments requires hybrid contracts that contain financial asset hosts to be classified and measured in their entirety in accordance with the requirements in paragraphs 4.1-4.5 of that Standard. However, AASB 139 requires an entity to separate some embedded derivatives from their host contract where the host contract is outside the scope of AASB 9. Such instruments, are measuredthem at fair value and include changes in their fair value are included in the statement of comprehensive income. AASB 9 or AASB 139 applies to derivatives embedded in a general insurance contracts unless the embedded derivative is itself a general insurance contract.
15.2.1 An insurer applies AASB 139 to its financial assets. Under AASB 139 a financial asset is classified and measured at fair value through profit or loss when is a financial asset that meets either of the following conditions:
(a) it does not meet the criteria specified in paragraph 4.2 of AASB 9 to be is classified as held for trading at amortised cost; or
(b) it is designated as “at fair value through profit or loss” upon initial recognition in accordance with paragraph 4.5 of AASB 9.. An entity may use this designation when it is a contract with an embedded derivative and paragraph 11A of AASB 139 allows the entity to measure the contract as “at fair value through profit or loss”; or when doing so results in more relevant information, because either:
(i) it eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as ‘an accounting mismatch’) that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases; or
(ii) a group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the entity’s key management personnel (as defined in AASB 124 Related Party Disclosures), for example the entity’s board of directors and chief executive officer.
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15.2.2 The view adopted in this Standard is that financial assets, within the scope of AASB 139 that back general insurance liabilities, are permitted to be measured at fair value through profit or loss under AASB 139. This is because the measurement of general insurance liabilities under this Standard incorporates current information and measuring the financial assets backing these general insurance liabilities at fair value, eliminates or significantly reduces a potential measurement inconsistency which would arise if the assets were classified as available for sale orand measured at amortised cost.
16.1 Non-insurance contracts regulated under the Insurance Act 1973 shall be treated under AASB 9 or AASB 139 to the extent that they give rise to financial assets and or financial liabilities respectively. However, the financial assets and the financial liabilities that arise under these contracts shall be designated as “at fair value through profit or loss”, on first application of this Standard, or on initial recognition of the financial assets or financial liabilities, where this is permitted under AASB 9 or AASB 139.
16.1.1 In relation to non-insurance contracts regulated under the Insurance Act, an insurer applies AASB 139 to its financial assets and AASB 139 to its financial liabilities. Under AASB 139 a financial asset or financial liability at fair value through profit or loss is a financial asset or financial liability that meets either of the following conditions:
(a) it is classified as held for trading; or
(b) it is designated as “at fair value through profit or loss” upon initial recognition. An entity may use this designation when it is a contract with an embedded derivative and paragraph 11A of AASB 139 allows the entity to measure the contract as “at fair value through profit or loss”; or when doing so results in more relevant information, because either:
(i) it eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as ‘an accounting mismatch’) that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases; or
(ii) a group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the entity’s key management personnel (as defined in AASB 124 Related Party Disclosures), for example the entity’s board of directors and chief executive officer.
AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards permits entities to designate financial assets and financial liabilities as “at fair value through profit or loss” on first application of the Standard.
16.1.2 Under AASB 9 a financial asset is classified and measured at fair value through profit or loss when;
(a) it does not meet the criteria specified in paragraph 4.2 of AASB 9 to be classified at amortised cost; or
(b) it is designated as “at fair value through profit or loss” upon initial recognition in accordance with paragraph 4.5 of AASB 9.
16.1.3 Under AASB 139 a financial liability at fair value through profit or loss is a financial liability that meets either of the following conditions:
(a) it is classified as held for trading; or
(b) it is designated as “at fair value through profit or loss” upon initial recognition. An entity may use this designation when it is a contract with an embedded derivative and paragraph 11A of AASB 139 allows the entity to measure the contract as “at fair value through profit or loss”; or when doing so results in more relevant information, because either:
(i) it eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as ‘an accounting mismatch’) that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases; or
(ii) a group of financial liabilities or financial assets and financial liabilities is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the entity’s key management personnel (as defined in AASB 124 Related Party Disclosures), for example the entity’s board of directors and chief executive officer.
AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards permits entities to designate financial assets and financial liabilities as “at fair value through profit or loss” on first application of the Standard.
18.4 AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9, issued in December 2009, amended paragraphs 2.3.1, 15.2, 15.2.1, 15.2.2, 15.5, 15.5.1, 15.5.2, 16.1 and 16.1.1, and paragraphs 18 and 19 in the Appendix to AASB 1023 and added paragraphs 16.1.2 and 16.1.3. An entity shall apply those amendments when it applies AASB 9.
55 In the Appendix to AASB 1023, paragraphs 18 and 19 are amended as follows:
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(d) derivatives that expose one party to financial risk but not insurance risk, because they require that party to make payment based solely on changes in one or more of a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract (see AASB 9 for derivative assets and AASB 139 for derivative liabilities);
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19 If the contracts described in paragraph 18 of this Appendix create financial assets or financial liabilities, they are within the scope of AASB 9 or AASB 139 respectively. Among other things, this means that the parties to the contract use what is sometimes called deposit accounting, which involves the following: