Initial Measurement of Financial Assets Initial Measurement of Financial Assets and Financial Liabilities

Initial Measurement of Financial Assets and Financial Liabilities

43 When a financial asset or financial liability is recognised initially, an entity shall measure it at its fair value minus plus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability.

44 When an entity uses settlement date accounting for an asset that is subsequently measured at cost or amortised cost, the asset is recognised initially at its fair value on the trade date (see Appendix A paragraphs AG53-AG56).

47 After initial recognition, an entity shall measure all financial liabilities at amortised cost using the effective interest method, except for:

(a) financial liabilities at fair value through profit or loss. Such liabilities, including derivatives that are liabilities, shall be measured at fair value except for a derivative liability that is linked to and must be settled by delivery of an unquoted equity instrument whose fair value cannot be reliably measured, which shall be measured at cost (see Appendix A paragraphs AG80 and AG81).

…

48 In determining the fair value of a financial asset or a financial liability for the purpose of applying this Standard, AASB 132, or AASB 7 or AASB 9, an entity shall apply paragraphs AG69-AG82 of Appendix A.

50 An entity: shall not reclassify a financial liability except in accordance with paragraphs 53 and 54.

(a) shall not reclassify ...

... after initial recognition.

50A The following changes in circumstances are not reclassifications for the purposes of paragraph 50:

(a) a derivative that was previously a designated and effective hedging instrument in a cash flow hedge or net investment hedge no longer qualifies as such;.

(b) a derivative becomes a designated and effective hedging instrument in a cash flow hedge or net investment hedge;.

(c) [deleted by the IASB]

53 If a reliable measure becomes available for a financial asset or financial liability for which such a measure was previously not available, and the asset or liability is required to be measured at fair value if a reliable measure is available (see paragraphs 46(c) and 47(a)), the asset or liability shall be remeasured at fair value, and the difference between its carrying amount and fair value shall be accounted for in accordance with paragraph 55.

54 If, as a result of a change in intention or ability or in the rare circumstances that a reliable measure of fair value is no longer available (see paragraphs 46(c) and 47(a)), or because the ‘two preceding annual reporting periods’ referred to in paragraph 9 have passed, it becomes appropriate to carry a financial asset or an entity shall measure the financial liability at cost or amortised cost rather than at fair value., Tthe fair value carrying amount of the financial asset or the financial liability on that the date of reclassification becomes its new cost. or amortised cost, as applicable. Any previous gain or loss on that asset that has been recognised in other comprehensive income in accordance with paragraph 55(b) shall be accounted for as follows:

(a) In the case of a financial asset with a fixed maturity, the gain or loss shall be amortised to profit or loss over the remaining life of the held-to-maturity investment using the effective interest method. Any difference between the new amortised cost and maturity amount shall also be amortised over the remaining life of the financial asset using the effective interest method, similar to the amortisation of a premium and a discount. If the financial asset is subsequently impaired, any gain or loss that has been recognised in other comprehensive income is reclassified from equity to profit or loss in accordance with paragraph 67.

(b) In the case of a financial asset that does not have a fixed maturity, the gain or loss shall be recognised in profit or loss when the financial asset is sold or otherwise disposed of. If the financial asset is subsequently impaired any previous gain or loss that has been recognised in other comprehensive income is reclassified from equity to profit or loss in accordance with paragraph 67.

55 A gain or loss arising from a change in the fair value of a financial asset or financial liability measured at fair value through profit or loss that is not part of a hedging relationship (see paragraphs 89–102), shall be recognised in profit or loss. , as follows

(a) A gain or loss ...

(b) ... the entity’s right to receive payment is established (see AASB 118).

56 For financial assets and financial liabilities carried measured at amortised cost (see paragraphs 46 and 47), a gain or loss is recognised in profit or loss when the financial asset or financial liability is derecognised or impaired, and through the amortisation process. However, for financial assets or financial liabilities that are hedged items
(see paragraphs 78-84 and Appendix A
paragraphs AG98-AG101) the accounting for the gain or loss shall follow paragraphs 89-102.

57 If an entity recognises financial assets using settlement date accounting (see paragraph 38 and Appendix A paragraphs AG53-AG56), any change in the fair value of the asset to be received during the period between the trade date and the settlement date is not recognised for assets carried at cost or measured at amortised cost (other than impairment losses). For assets carried measured at fair value, however, the change in fair value shall be recognised in profit or loss or in equity, as appropriate under paragraph 55 paragraph 5.4.1 of AASB 9.